Government review calls for immediate improvements at Croydon Council’s housing company

News02.02.215.00 PM by Dominic Brady

A government-commissioned review into the financial failure of Croydon Council has urged leaders to get a grip over its housing company, Brick by Brick, which was identified as a major contributor to the authority’s woes.

Croydon issued a Section 114 notice in November last year (picture: Getty)

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A government-commissioned review into the financial failure of Croydon Council has urged leaders to get a grip over its housing company Brick by Brick, identified as a major contributor to the authority’s woes #UKhousing

A rapid review into the council’s finances and governance said that Brick by Brick has not delivered on expectations, with the town hall having managed the endeavour “extremely poorly”.

“The council should immediately strengthen its oversight of Brick by Brick (BBB) by improving communication, monitoring contract information and development milestones and having experienced non-execs on the BBB board,” it added.

Ministers ordered the review after Croydon Council issued a Section 114 notice in November last year, putting a freeze on all non-essential spending, after it accumulated a £66m budget deficit.

Auditors revealed that the authority had lent Brick by Brick £200m since 2015 without receiving any dividends or interest in return.

The company formed a major part of the council’s plans to borrow another £500m over three years, today’s review said.

Lead reviewer Chris Wood said: “Members of both parties [Labour and Conservatives] and senior officers have reported to us the existence in the past of an ‘inner circle’ of the (then) leader and three cabinet members, who exercised a great deal of control of the council’s finances and championed the cause of the council’s commercial activities including Brick by Brick.”

The review also said: “The council’s assessment of the performance of Brick by Brick has changed dramatically over the past few months, with a realisation that forecast interest payments and dividends would not be realised.

“It is clear that the council cannot simply close or walk away from Brick by Brick. It is our view that the council has mismanaged Brick by Brick but that does not invalidate the business concept.”

Alongside the publishing of the review, housing secretary Robert Jenrick announced the creation of an “improvement and assurance panel” comprised of local government and finance experts to help Croydon Council’s recovery.

Mr Jenrick said: “The rapid review into Croydon Council found serious failings in governance, financial strategy and commercial investments, which have led to taxpayers and residents being severely let down over a number of years.

“This must end now, and I have appointed an expert panel to help the council urgently address the issues they face and deliver a comprehensive recovery plan.”

The panel will be headed by Tony McArdle, who is currently lead commissioner at Northamptonshire County Council after it became the first council in 20 years to issue a Section 144 notice.

Hamida Ali, leader of Croydon Council, said: “I really welcome the panel and their role to bring their expertise to bear through challenge and advice as we seek to drive forward and deliver our renewal plans at pace.

“We have already made significant progress but there is a long way to go and we will continue to engage fully with the panel and MHCLG [Ministry of Housing, Communities and Local Government] as we continue this vital work.”

Colm Lacey, chief executive of Brick By Brick, said: “Brick By Brick continues to provide Croydon Council and their partners with information and analysis to inform a range of detailed reviews and reports and to address any actions arising for Brick By Brick.

“We understand that Croydon Council, as shareholder and funder of Brick By Brick, will provide an update as to its future intentions for the company at a cabinet meeting later this month. Any queries on their plans should be directed to the council.

“In the meantime, Brick By Brick is continuing to deliver our current programme of private and affordable housing to our usual high standards. To date we have completed more than 300 properties across 15 sites and our active programme (onsite or in contract) will deliver more than 600 additional units over the coming months. Sales continue to be very positive.”

Update at 14:10pm, 03.02.21:

This story was updated to include a comment from Brick by Brick.