Croydon Council Proposes Maximum 4.99% Tax Increase for 2026-27
Croydon residents are bracing for another significant council tax hike this April, with the local authority proposing a 4.99% increase for the 2026-27 financial year. This maximum allowable rise without a referendum comes despite recent changes to central government funding that provided the South London borough with a historic cash injection.
Historic Debt Burden Drives Financial Pressure
The proposed increase, which includes a dedicated 2% levy for adult social care, is expected to generate approximately £13.5 million in additional revenue for local services. This marks the second consecutive year that Croydon has implemented the maximum permitted council tax rise, following a similar 4.99% increase in the previous budget cycle.
Council documents reveal that Croydon's staggering £1.4 billion debt burden remains the primary driver behind the tax increase. In the coming financial year alone, the authority must allocate £86.1 million solely for interest payments and loan repayments. This debt servicing consumes a remarkable 17% of Croydon's total core spending power, funds that would otherwise be available for frontline services.
Financial officers have specifically attributed the current crisis to "pre-2020 reckless investment decisions" made by previous council administrations. The council's financial reports emphasize that these historical choices continue to constrain current budgetary options and service delivery capabilities.
Government Intervention and Additional Support
Since last summer, government-appointed Commissioners have been overseeing Croydon Council's operations to ensure compliance with "best value duty" requirements. These commissioners possess authority to override local decision-making, supervise financial management, and intervene in personnel matters involving senior council staff.
Croydon has requested an additional £119 million "Capitalisation Direction" for 2026-27 to meet ongoing financial obligations. These special arrangements permit local authorities to fund day-to-day operational costs through borrowing or asset sales. Since 2021, Croydon has received more than £500 million in exceptional financial support through such mechanisms, with projections indicating this cumulative total could reach £891.2 million by 2029-30.
The council's own assessment acknowledges that "capitalisation directions... add to Croydon's debt burden" and that the authority "cannot become financially and operationally sustainable without significant central government assistance."
Soaring Service Demands Compound Financial Strain
Council reports describe a "perfect storm" of escalating service demands, particularly in social care and homelessness services. The authority has allocated £43.3 million in growth funding for 2026-27 to address these mounting pressures, which officials attribute to what they term the "worst housing crisis in living memory."
Specific service areas experiencing dramatic cost increases include:
- Adult Social Care requiring an additional £7.7 million due to rising numbers of working-age adults with complex needs
- Inflationary cost pressures adding £5.4 million to care placement expenses
- Sharp increases in complex placements for looked-after children
- Escalating transport costs for children with special educational needs
The council has criticized the Home Office and other agencies for "bulk buying" accommodation units at inflated rates, which officials claim has exacerbated local housing challenges.
Cost-Saving Measures and Service Reductions
To address the financial gap, Croydon plans to implement £34.1 million in savings during the coming year. The council has explicitly stated that it "will need to do less and spend less in the future," signaling potential service reductions across multiple departments.
Notable austerity measures include:
- Dimming streetlights to save approximately £100,000 annually
- Increasing burial and cremation fees to generate an additional £10,000
- Implementing a "Unified Front Door" strategy to move most services online, projected to save over £1.5 million through digital self-service options
Political Responses and Future Outlook
Executive Mayor Jason Perry defended the budget proposals, stating: "When I became Mayor I inherited an incredibly challenging financial position. I have always been clear that my top priority is to repair this damage and get our council back on track for the people of Croydon."
Mayor Perry emphasized that his administration has focused on "modernising and digitalising services, focusing on prevention and working even more closely with our partners to deliver services differently" rather than simply "slashing services and hiking council tax."
Opposition leader Councillor Stuart King offered a starkly different assessment, criticizing Mayor Perry's tenure: "In four years, Jason Perry has hiked council tax for residents by a staggering 33%. As a result of his disastrous mismanagement of multi-million-pound overspends, his final budget sees him borrowing twice as much as in his first budget."
Despite the challenges, the council has identified some positive developments, particularly the government's recent Fair Funding Review, which will provide Croydon with an additional £59.6 million phased over the next three years. Council officials had previously argued that the borough was disadvantaged by funding formulas that favored inner London boroughs.
The final budget proposal will be presented for approval at the full council meeting scheduled for February 25, 2026, where elected representatives will determine the financial direction for one of London's most financially challenged local authorities.
