Croydon Council wrongly took £40m from social housing fund

A council sub-committee heard £9.5m a year had been taken from Croydon's Housing Revenue Account

A cash-strapped London council wrongly took about £40m from a pot reserved for social housing, it has emerged.

The incident contributed to Croydon Council's third bankruptcy notice in two years, the Local Democracy Reporting Service has been told.

The council's director for housing, Susmita Sen, explained that £9.5m a year had been taken from the ring-fenced Housing Revenue Account (HRA).

The revelation was heard at a council sub-committee earlier this week.

The HRA is only supposed to be used for the authority's social housing stock and it is from this account that maintenance and repair costs come for council homes.

"What we've established is that there has been an overcharge of the HRA for several years," Ms Sen said.

"These are for services that are general fund activity, such as the homelessness service...

"What we're looking to do to rectify that situation is to return around £40m to the HRA. Whilst it is bad news for the general fund it is good news for the HRA."

Ms Sen said there have been other local authorities which had been in the same position and had to return the money.

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She warned while the current figures date back to 2019, other incorrect charges to the account could be uncovered as the past finances are re-examined. The last three years of Croydon Council's accounts are yet to be signed off by its external auditors.

Last month, the authority declared bankruptcy for a third time, meaning local libraries, a retail park and community hubs may have to be sold off to balance the books.

It issued a Section 114 notice after it realised it faced a £130m black hole in next year's budget. Its Conservative mayor Jason Perry blamed "toxic historic mismanagement".

Croydon declared bankruptcy in 2020 and was given a £120m bailout loan by central government and now needs to pay £47m a year to meet its £1.6bn debt.

The council is waiting to hear whether the government will step in to help the struggling authority.

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