Croydon finally signs off on 15% council tax rise after legal warning

Bankrupt Croydon Council has agreed a record 15% rise in council tax after warnings that a budget impasse would leave the town hall facing legal action and cost the authority £20m a month.

Hundreds of protesters attended Thursday night’s emergency meeting where councilors voted through plans that will add £235 to the average household’s annual bill from next month.

Last week, the increase was rejected by 37 votes to 34, when Labour, Liberal Democrat and Green councilors opposed the budget of the minority Conservative administration.

But after stark warnings that a budget would fail, the plans were voted through on Thursday with 34 votes in favour, three against and 33 abstentions.

During a three-and-a-half-hour meeting, councilors were warned that it would not be possible to send council tax bills, at a cost of £20m a month, unless they could agree a financial plan.

Auditors Grant Thornton said not approving the budget would “not only be illegal, it would make a bad financial situation worse and further damage the council’s reputation”.

Croydon filed for its third bankruptcy notice in two years in November.

The borough has called on central government to write off £1.3bn of debt, including £500m built up in a series of failed business ventures by the previous Labor administration.

Ministers have given the local authority permission to increase council tax by 15% this year without the need for a public referendum.

Mayor of Croydon, Jason Perry, said: “I am pleased that the council has agreed to this challenging budget which will help us deliver services for residents while taking much needed action to repair Croydon’s finances.

“This is not a budget I wanted to set, but it is a budget that will help us protect vital services for our residents.

“No one wants to increase council tax, but the council is already making £36m of savings this year – we simply cannot make further cuts and continue to deliver the services our residents need.

“We have shown that we will not shy away from making difficult decisions.”

He added that a further £2m would be added to a hardship fund to support the poorest residents.

The Government has said it is “considering” giving Croydon £224m of bailout loans. But a £540m debt write-off is still under discussion.

Croydon’s budget was passed by 34 votes to three with 33 abstentions.

Croydon Labor group leader Stuart King said: “Engaging the council in a prolonged gridlock scenario, with the consequences of a statutory budget not being set, is the last thing Croydon residents need at this time.

“While Labor does not agree to a 15% increase in council tax, we could not in good conscience repeatedly block the setting of a statutory budget and plunge the borough into a Tory-induced financial crisis.”