The Minister for Local Government and English Devolution (Jim McMahon)
All hon. Members will recognise the importance of having well-functioning local councils which provide essential statutory services local residents rely upon. The Government will continue to work directly with a small number of councils in difficulty, and this should be done in a way that is not punitive and is based on genuine partnership to secure improvements. Today, I would like to update the House on the statutory interventions in Croydon and Nottingham.
Croydon
In February 2021, the previous Government intervened in Croydon following serious financial and governance concerns raised in the non-statutory review of the council and two reports in the public interest from external auditors. A non-statutory improvement and assurance panel was appointed in February 2021. The intervention was then escalated in July 2023 through the issuing of directions which strengthened the remit of the panel by moving it to a statutory footing. The panel continues to be led by Tony McArdle OBE and consists of experts in finance, commercial, adult social care, housing and children’s services.
I will today publish the latest report from the panel, received in April this year, alongside its subsequent letter received on 15 November. Overall, there have been significant developments in the council’s progress towards reform and recovery, particularly improved governance, leadership and service delivery.
Despite this progress, the council remains one of the most financially distressed in the country. The council’s general fund debt sits at £1.3 billion and it relies on the allocation of exceptional financial support (EFS) through in-principle capitalisation directions to balance its budget. The council has produced a transformation plan and a medium-term financial strategy (MTFS) to attempt to reduce its large deficit and debt to a more manageable level. I recognise that there is further work to be done to restore the council to long-term financial sustainability and that this should be a priority area of action for the council moving forward.
I have asked the panel to provide a further update on the intervention’s progress in April 2025, with particular attention to the council’s budget-setting process and delivery of its transformation plan, in which it aims to become the most cost-efficient authority in London. I will continue to work closely with the council as it seeks to address its financial challenges and sustain the strong working relationship both the panel and council have built with the Ministry. I will continue to monitor progress over the coming months and keep the House informed of developments.
Nottingham
As the House will be aware, the Ministry’s involvement began with a non-statutory improvement and assurance board in January 2021 following serious governance and risk management issues associated with the council’s now closed private energy company, Robin Hood Energy. The council also identified unlawful practices associated with its housing revenue account in December 2021 and issued a section 114 notice shortly afterwards.
The board was escalated to a statutory footing in December 2022. Serious issues remained with finances, governance and culture—including the council’s second section 114 notice in November 2023—and progress was felt to be too slow.
On 22 February 2024, the former Secretary of State, the right hon. Michael Gove, announced that directions had been issued to implement a commissioner-led intervention package. These required the commissioners to report to the Secretary of State at six-monthly intervals, and the first report was received on 22 August 2024, which I will publish today.
This report makes clear that progress has been made: council officers and members have been working constructively with commissioners to map out a path to recovery, and have a strategy in place to reach a more sustainable position and better deliver services to their residents. It is clear that significant challenges remain— including the ongoing budget gap, need for service modernisation and culture change across the organisation —and I look forward to hearing more about the council’s progress in the next report, which I have requested in March 2025.
Conclusion
The Government will play their part by repairing the foundations of the sector overall, with the settlement this month being the start of that programme. This will include an immediate funding injection worth over £4 billion, including a £600 million recovery grant, which will be distributed to places with greater need and demand for services (we have used deprivation as a proxy for this), and which are least able to fund their own services locally. It also includes a £680 million uplift to the social care grant for adult and children’s services, a new children’s social care prevention grant, worth £250 million, which will lay the groundwork for children’s social care reform and an additional £44 million of new funding to pilot a kinship allowance and create hundreds of new foster placements. To fix the broken care market, the Government are also bringing forward legislation to crack down on the profiteering from our most vulnerable children and plans include a financial oversight regime, enhanced Ofsted powers and powers to cap profits if excessive profit making continues.
Moving forward we will hardwire stability and security into the system with multi-year settlements and fewer restrictive grants. This will allow councils to focus spending on local priorities, and we will set out and measure progress on the key services and outcomes we expect local government to deliver.
These measures as a whole go hand in hand with the work to make every council fit, legal and decent with a rebuilt system of accountability and oversight. We will repair the early warning system, deal with the audit backlog, and focus on raising standards in local government will help support the overall resilience of the sector in the long term.
The road to financial recovery in Croydon and Nottingham must be met with the seriousness it deserves, and I am pleased to see a clear commitment to move to new operating models. Because of the scale of the challenges, it is self-evident that there will still be difficult decisions to come. It is essential that in making these decisions there is a clear strategy for the form respective councils will take as their new operating model, and that prevention and reform of local public services is central to it.
The Government are committed to work in genuine partnership with councils under intervention to support their reset, reform and recovery, making sure residents have what they need from their local council, including confidence in its governance, financial management and service delivery. I will continue to monitor progress over the coming months and ensure these councils get the support they need to secure sustainable continuous improvement.
I will deposit in the Library of the House copies of the documents I have referred to, which are also being published on gov.uk today.
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