The hugely damming report published recently by auditors Grant Thornton into Croydon Council’s finances listed a number of reasons why the Council has been pushed to the brink of bankruptcy. One of the areas highlighted was the decision of the failing Labour-run administration to undertake highly risky property investments, when they had neither the expertise nor market knowledge to do so.
In 2018 the Council set up an Asset Investment Fund to invest in commercial properties which were expected to deliver a financial return and revenue stream to the Council in the long term. The fund was expected to invest in small district centre properties which could be refurbished and then rented out, generating income for the Council. An objective set of criteria to assess each investment was proposed. The money to set up this fund was to be borrowed. The Council was therefore planning to get into small time property development, which itself was a questionable decision given its primary role is to deliver key public services.
What followed however was truly shocking! In 2018 the Council made two significant large property investments which was a huge change from its stated policy. In August 2018 Croydon Park Hotel was bought for £30 million, and in November 2018 the Colonnades Shopping Centre on Purley Way was bought for £46 million. Remember all of this was borrowed money which had to be paid back with interest.
This £76 million investment was made despite the then Council Leader Cllr Tony Newman or his finance head Cllr Simon Hall having no knowledge or expertise of the retail and leisure markets. These are highly complex and ever-changing markets, and no investments should be made in them without fully understanding the risks and challenges involved. In fact, the decision to invest in Croydon Park Hotel was made during the summer holidays by Cllr Newman under ‘delegated powers’, without being discussed at a full Cabinet or Council meeting. It is indeed shocking that such significant investment decisions, described by the auditor as ‘inherently flawed’, were taken without Council members being given the chance to either challenge or scrutinise them.
Concerns raised by Conservative councillors about this whole arrangement were raised at a special Scrutiny meeting that we demanded took place - to examine in detail the decision on Croydon Park Hotel. Our concerns were batted away by the Labour administration but they have proved to be well founded. The Colonnades shopping centre has closed while the Croydon Park Hotel went into administration in June 2020, leaving the Council with two dud assets, on which they spent £76 million of borrowed money on.. In the current climate who knows if they will be able to recover their investment. Ultimately the burden of paying for these flawed investments will fall on Croydon residents.
If it was the Council’s policy to borrow money and invest in assets, surely it would have been better to invest in upgrading our leisure centres, swimming pools, libraries, and other public assets. Purley Pool for example requires around £750,000 in capital investment to bring it back into use. Certainly a worthwhile investment compared to spending millions on property speculation!
Ultimately Croydon residents will have to pay the price for these terrible investment decisions through higher Council Tax bills and poorer public services. While our public and community assets are in desperate need of investment, our failing Labour Council chose to invest in risky and flawed property investments, which have pushed us to be the brink of bankruptcy.
Real change is what Croydon needs.
Croydon deserves better.
