Croydon Council threatens tax hike after declaring bankruptcy

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Croydon Council HQImage source, Croydon Council
Image caption,
The council has debts of £1.6bn

Council tax in a south London borough could increase by more than 5% as the authority aims to fill a £130m hole in its budget.

Croydon Council issued a bankruptcy notice on Tuesday, admitting it would not be able to balance its budget in the next financial year.

It needs to pay £47m a year to meet its £1.6bn debt.

It comes after the Autumn Statement announced the threshold on council tax would be raised to 5%.

But a Section 114 notice issued by Jane West, corporate director of resources, states the council may need to increase council tax beyond 5%, the Local Democracy Reporting Service said.

This would would see average bills go above £2,000 for the first time.

The notice said the council needed "extraordinary support", which could include writing off all or some of the council's £1.5bn debt, permission to pay debt off over a longer period or at a lower interest rate or permission to "increase the council tax beyond the referendum cap".

Mayor of Croydon Jason Perry said: "It is going to take time to work our way through this. Unfortunately, people are going to see some services come to an end and we might see a council tax rise, we might have to go beyond the 5%."

'Protect most vulnerable'

Leader of the Labour opposition, councillor Stuart King, said the council should be properly funded by the government rather than having to put up council tax.

He said: "The Conservatives should not be pushing up taxes for residents during a cost-of-living crisis. Instead of making residents pay, Mayor Perry should be calling on the government to ensure Croydon is properly funded."

A Department for Levelling Up spokesperson said: "We understand the pressures facing councils and we are working with them to ensure vital services are protected.

"Councils will have the flexibility to raise money through council tax, but we expect them to exercise restraint. Protecting the most vulnerable households remains our priority and those on the lowest incomes are able to apply for council tax reductions."

The council has made about £90m in savings and £50m in asset sales. It also has proposals to save £44m during the 2023-24 financial year.

It estimated it could raise about £100m by selling off 18 properties it owned in the coming years, which includes the Colonnades, a retail park it bought for £53m in 2018.

The council's cabinet will meet on 30 November to discuss its medium-term financial strategy.

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