Recommendation 11

The Department’s monthly survey is an addition to a broader framework of risk monitoring that draws on a range of other information sources.22 Through the use of this framework the Department had placed Croydon Council on its ‘long list’ of councils at financial risk for some years. However, it was only in the light of the council’s return to the Department’s monthly survey in April 2020 and subsequent conversations that the Department became fully aware of the scale of the financial challenge faced by the sector.23 The council’s section 151 officer subsequently issued a section 114 notice in October 2020, indicating that the council was at risk of failing to balance its budget, which is unlawful. We challenged the Department on whether it should have taken earlier action in relation to the council. The Department told us that in its view the authority itself was not fully aware of the scale of its own financial pressures for much of 2020, and by extension that the Department could not have been expected to know.24 The Department has agreed £120 million worth of capitalisation directions, which allow local authorities to either borrow or use receipts from the sale of capital assets to support revenue spending, in order to stabilise the council’s finances.25 19 Qq 100 and106 20 C&AG’s Report, paras 3.15, 3.16 and 3.21 21 Q103; C&AG’s Report, paras 3.17 and 3.19 22 Comptroller and Auditor General, Financial sustainability of local authorities 2018, HC 834, Session 2017–2019, 8 March 2018, para 21 23 C&AG’s report, para 3.27 24 Qq 97–98 25 Letter from Jeremy Pocklington CB, Permanent Secretary Ministry of Housing, Communities & Local Government to the Committee of Public Accounts regarding exceptional financial support, dated 17 March 2021. The £120 million comprises £70 million confirmed for 2020–21 and £50 million in principle for 2021–22. COVID-19: Local government finance 13 Designing schemes to support local authorities and their communities during the pandemic