Despite areas of improvement, the council is still heavily reliant on extraordinary government support, prompting auditors to issue a rare statutory recommendation – a formal warning requiring urgent action.
In their report, auditors Grant Thornton state clearly: “The unsustainable nature of the financial position, alone, resulted in the council not achieving their exit strategy from existing government support.”
They add that “arrangements to achieve financial sustainability have deteriorated” in the past year, despite previous efforts to stabilise the council’s budget.
The annual audit of the 2024–25 accounts, and the resulting statutory recommendation under the Local Audit and Accountability Act 2014, comes amid Croydon’s growing reliance on Exceptional Financial Support from central government.
The amount lent to the council has sharply risen, increasing from £51million to £136million in just one year.
These developments have serious consequences for residents and local services. With three Section 114 bankruptcy notices issued in two years, each confirming that the council could not lawfully balance its budget, the government imposed direct commissioner control in August 2025.
These appointed commissioners now have powers to override local decision-making and ensure that the council meets its legal duty to deliver best value on its day to day services like education and social care.
The auditor’s most urgent recommendation is for the council to work with the government and its commissioners to develop a sustainable and affordable plan to reduce its operating costs and long-term debt.
Mayor Jason Perry initially faced criticism for what some perceived as a combative response to the announcement of the commissioners’ takeover this summer. He stated that he would oppose any externally imposed cuts that would impact Croydon residents.
Auditors also warned that without a viable debt solution, the council cannot demonstrate that it is capable of achieving financial independence or delivering the savings needed to protect services.
While the overall picture is serious, the report also highlights some areas of progress. The Pension Fund remains well-managed, with net assets rising to £1.96billion, an increase of £205million over the year.
The Housing Service has also improved, following the lifting of a regulatory notice by the Regulator of Social Housing in April 2025.
A new Housing Assurance Board, including residents and independent experts, is now overseeing quality and performance.
Work is also under way to improve the handling of complaints. The report found that the number of cases escalated to the Local Government Ombudsman is falling, and a dedicated officer has been appointed to improve responsiveness and coordination with investigations.
However, several serious weaknesses remain. They stress that the Future Croydon transformation programme, aimed at modernising and streamlining council services, must now deliver its full savings without delay.
Special educational needs and disabilities (SEND) services remain a concern, with auditors calling for urgent improvements to data quality and budget monitoring. The report also recommends better transparency around financial reserves.
Updated financial forecasts and benchmarking data should be included in future budget reports to give councillors a clearer picture of the sustainability of reserves and the financial risks facing the authority.
In her response to the recent report, Labour candidate for Croydon Mayor Rowenna Davis told the Local Democracy Reporting Service (LDRS): “This council desperately needs a deal on the debt from national government, but Croydon needs to get its own house in order before it can get it.
“There is still so much talk about becoming more efficient and too little action.
“The Conservative Mayor has also blown up his relationship with national government by publicly attacking the appointment of commissioners. It’s going to be harder to get a deal for Croydon when you don’t have a constructive relationship with national government. Ultimately, we need a new Mayor to get this sorted – luckily the elections are in May.”
The council has accepted all recommendations and is expected to outline its proposed actions and progress against each recommendation in its meeting next Wednesday (September 22). Reports will also be submitted to the Audit and Governance Committee and shared with commissioners.
Croydon’s current financial crisis, as the report acknowledges, is the result of decisions made by successive administrations over the past decade. In 2020, the council became the first in 20 years to issue a Section 114 notice, placing it under national scrutiny.
Since then, it has operated under heightened government oversight, initially through an Improvement and Assurance Panel, and now under the direct control of appointed commissioners.
Speaking to the LDRS, Mayor Jason Perry said: “Grant Thornton’s report is absolutely right to highlight the elephant in the room – Croydon’s historic debt. The government and the council need to work together on a long-term solution. This isn’t about blame, it’s about facing reality. We cannot ignore it any longer, and I welcome the recommendation to deal with it head-on.
“I have worked closely with the commissioners and auditors throughout this process, and they recognise the huge progress Croydon has made in stabilising the council’s finances, rebuilding services and restoring integrity after the financial collapse under Labour. Grant Thornton have been clear that the shocking governance issues Labour left behind have now been addressed by my administration.
“So it’s a bit rich for anyone from the Labour Party to criticise the management of Croydon’s finances when they caused the mess in the first place.
“They bankrupted the council, left £1.6billion of debt, and forced residents to pay the price. After three years of empty words and stone-throwing, Labour still have no plan, no credibility and no answers for how they’d fix the disaster they created.”
