22 1GM Saturday November 14 2020 | the times
News
Two years ago Croydon council
swooped on what it thought was a sure
thing. At £29.8 million it wasn’t cheap,
but the Croydon Park Hotel had stylish
decor and good transport links.
It would, officials hoped, bring in
£1 million a year for the council. To that
end, according to reports at the time,
officials were prepared to pay £5 million
over the original asking price.
Today it has come to represent the
reckless spending that brought finan-
cial ruin on the south London borough.
The hotel went in to administration last
year and is thought to be being used as
temporary accommodation for home-
less people.
The council followed its hotel
into the financial mire. After fail-
ures and poor investments high-
lighted by auditors, the local
authority this week in effect
declared itself bankrupt.
The council, which has debts
totalling more than £1.5 billion,
made risky investments on the
property market, lent more than
£200 million to its housing com-
pany and overspent for years on
child and adult social care. It bor-
rowed £545 million to invest in
property and its own companies.
Over the past four years local
authorities have borrowed £6.6 bil-
lion to buy shopping centres and office
blocks to try to replace revenue lost by
central government funding cuts.
The finances of many are now taking
a hammering as retail tenants default
on their rent and the value of office
buildings has plummeted amid the shift
to home working.
Property experts have long ques-
tioned the wisdom of councils investing
in retail property and the governmentwarned three years ago that risky in-
vestments were being made with tax-
payers’ cash. Croydon spent millions
on property the following year.
“They were late to the party and
the party was already over when they
arrived,” Tim Pollard, former leader of
the council’s Conservative opposition,
said, adding that the decision to buy the
hotel freehold, under powers delegated
to Tony Newman, the council’s then
leader, was taken quickly. “We were
given literally a day’s notice.” Croy-Bankrupt council’s £30m property punt
Emma Yeomans, Andrew Ellson don council also invested £46 million in
the Colonnades shopping centre which
has suffered badly in the pandemic.
Mr Newman stepped down last
month amid criticism of the scheme.
There is now an independent review
into the spending, which included lin-
ing up buyers for stylish new-build flats
only to find that the council-owned de-
veloper had not registered as a shared
housing provider, so prospective own-
ers could not get mortgages.
Another investigation has begun into
Croydon’s privately owned companies,
including Brick by Brick, which it set up
to build affordable housing. Auditors
said last month that the council was not
getting any money from this invest-
ment. They called for an urgent review
into “the circular nature of the council
taking out borrowing to lend to
Brick by Brick to build the proper-
ties and then the council taking
out additional borrowing to pur-
chase properties from Brick by
Brick”.
Brick by Brick said: “We are
entering an important phase
where the proceeds from sales
provide a significant financial
return to the council, which can
be spent on services.”
Hamida Ali, who took over from
Mr Newman as council leader this
month, said: “While we continue
to work hard to find savings, we
must focus our spending on es-
sential services and protecting our
vulnerable residents. We’re not
going to fix these problems over-
night.”
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arrivCroydon Park Hotel, left, and the Colonnades mall. Hamida
Ali, below, took over the council from Tony Newman, right