Croydon Council is facing a projected budget overspend of £2.3 million by the end of the financial year, according to the latest Period 3 Financial Performance Report. This figure represents an improvement of £0.8 million since the previous reporting period.
Despite the overspend, service directorates are expected to implement further expenditure reductions or mitigations to balance the budget. These measures include reducing net expenditure or bringing forward mitigations so that the annual budget can be balanced within the budgeted level of capitalisation directions.
The report highlights significant unfunded local government cost pressures nationally and locally, relating to increases in demand and market prices. These pressures require addressing through government policy and/or funding level changes. A notable example is the current government policy of holding housing rent level subsidies at 90% of the Local Housing Allowance (LHA) rates in 2011, which currently costs Croydon approximately £45 million per annum.
The largest overspends are noted in the Housing Revenue Account (HRA), which is forecasting an overspend of £3.9 million, and the Dedicated Schools Grant (DSG), which is forecasting an overspend of £45.0 million.
Progress has been noted on the Medium-Term Financial Strategy savings target, with £26.5 million, or 76.4%, of the £34.7 million target forecast to be achieved. This progress is crucial for the council's overall financial health.
The report also notes the Council's historic borrowing and subsequent debt burden, alongside national and local service pressures, as critical factors contributing to the non-sustainability of the Council's revenue budget. Approximately 20% of the Council's core spending power is currently allocated to debt-related costs.
Current forecasts are based on the best available information and will be subject to review. The Financial Strategy 2027-30 sets out the approach for returning Croydon to long-term financial sustainability, with the objective of achieving balanced budgets in the future without reliance on Exceptional Financial Support (EFS).