On 23 March Croydon Council announced ‘it will be taking unprecedented action to hold former senior leaders to account for misconduct, wrongdoing and failures in governance that contributed to the authority’s financial crisis’. The council’s Appointments & Disciplinary Committee also unanimously agreed that a file be sent for consideration to the Metropolitan Police and any relevant professional bodies. Council members also backed legal action to recover as much of a £437,000 settlement paid to former chief executive Jo Negrini ‘as is legally possible’.
This followed (among other things): a public interest report (PIR) issued by Grant Thornton, Croydon’s external auditors, on 23 October 2020 concerning the council’s financial position and related governance arrangements; an independent report, Collective Corporate Blindness, on the council’s corporate management actions, systems and operating environment, issued in March 2021 by Richard Penn, senior associate of the Local Government Association; and a further PIR issued by Grant Thornton on 26 January 2022 concerning the refurbishment of Fairfield Halls (a Croydon arts, entertainment and conference centre) and related governance arrangements.
Croydon executive mayor Jason Perry said: ‘The scale and severity of Croydon’s financial collapse is unprecedented and that is why we are recommending unprecedented steps.’ He also said: ‘The council has issued three Section 114 Notices; it has had to make savings of £90m over the last two years and another £36m this year; it has £1.6bn toxic debt in total and has had to seek permission to borrow £369m from government.’
Section 114 Notices refer to duties on an authority’s chief finance officer under section 114 and 114A of the Local Government Finance Act 1988 to report to the council or executive (as applicable) if (among other things) the council ‘has taken or is about to take a course of action which, if pursued to its conclusion, would be unlawful and likely to cause a loss or deficiency on the part of the authority’.
The 2020 PIR (among other things) found ‘collective corporate blindness to both the seriousness of the financial position and the urgency with which actions needed to be taken’. It had been noted (among other things) that the council increased borrowing significantly in recent years, using the loan monies to invest in companies which it established, while ‘the council’s governance and oversight of the companies [showed] insufficient rigour and control’. And: ‘Despite heavy investment from the council, the council has not yet received any significant return.’
Penn was asked to explore what led to the council being ‘in such a perilous and precarious financial position’ following the 2020 PIR. He noted messages indicating a ‘lack of a performance culture, an industry of bureaucracy, the absence of accurate and relevant data, and systems and processes that are clunky, non-intuitive and unaligned’. There was also ‘a significant level of confusion over member and officer roles’. In the circumstances, he recommended that formal consideration be given as to whether there should be disciplinary proceedings. The officers identified included the executive director of resources and monitoring officer; and the director of finance, investment and risk, and section 151 officer (the officer responsible for the proper administration of the authority’s financial affairs). Penn also recommended that referral of his report to the Metropolitan Police be considered ‘for assessment of any further action being warranted in regard to the handling of public money and conduct in public office’.
The January PIR noted: ‘The council’s historical arrangements failed to ensure the legality of the arrangements for the project and allowed governance gaps which prevented monitoring of the project, oversight, and wider scrutiny and challenge that may have allowed corrective action to have been taken.’ The lack of appropriate action represented a failure to discharge the duties expected from a small group of senior officers, including the then three senior statutory officers.
The recommendation that the Metropolitan Police be asked to consider whether any action was warranted concerning conduct in public office raises issues as to whether the misconduct alleged would be sufficient to trigger the common law offence of misconduct in public office (which carries a maximum sentence of life imprisonment). Following A-G’s Ref (No. 3 of 2003) [2004] EWCA Crim 868, (and restated by the Court of Appeal in R v Chapman and others [2015] EWCA Crim 539), the offence is committed where: ‘(i) a public officer acting as such, (ii) wilfully neglects to perform his duty and/or wilfully misconducts himself, (iii) to such a degree as to amount to an abuse of the public’s trust in the office holder, and (iv) does so without reasonable excuse or justification’.
As to what amounts to an abuse of public trust in the office holder, the threshold is high. Before a criminal offence can be found, there must be a serious (and not merely negligent) departure from proper standards falling so far below acceptable practice as to amount to an abuse of the public’s trust in the office holder. The misconduct must be ‘calculated to injure the public interest so as to call for condemnation and punishment’.
And it is ‘always necessary to assess the conduct in the circumstances in which it occurs’.
Clearly, whether the behaviour of those impugned in the Croydon context meets the criminal threshold will be highly fact-sensitive should any matter be brought to trial. Nevertheless, the fact that officers have been reported to both police and professional bodies for alleged contribution to governance and financial difficulties will raise anxieties for many officers in authorities with similar vulnerabilities.
Nicholas Dobson writes on local authority law and governance
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