Croydon Council is still waiting to hear whether the government will write of half a billion pounds worth of debt as it struggles to get back onto a stable financial footing.

Earlier this year, the council was given a £63million bailout loan from the government to balance its budget for 2023/24.

It was also given a further loan, known as a capitalisation direction, of up to £161.6m to address “legacy issues”.

At the same time, the government gave Croydon special permission to increase council tax by 15 per cent, the largest hike in the country.

It came after the authority was forced to issue a bankruptcy notice for the third time at the end of 2022.

However, the council is still in discussions about whether the council will agree to writing off some of its debts of £1.6 billion which cost £47 million a year to pay back and keep up with interest repayments. 

Croydon has asked for a total of £540 million to be written off.

The council has also asked the government to consider writing off £540 million of its debt.

If approved, this would reduce Croydon’s debt by £38 million a year.

Next week, Croydon mayor Jason Perry is set to give an update to the council’s Scrutiny and Overview Committee.

Included in the papers for the meeting is a letter from Mr Perry to the minister for local government, Lee Rowley, dated April 26.

In it, the Croydon mayor thanked the minister for a bailout loan and said the council will “continue to work” with the government appointed improvement and assurance panel.

Mr Perry wrote: “We have already begun work with the panel to define an ‘exit strategy’, setting out the improvements needed in the Council over the coming years. Primary amongst these will be to return Croydon to a sustainable financial footing.

"As we have previously discussed, however, the increasing cost of servicing the £1.6bn debt left by the previous administration, and the fact Croydon does not have anywhere near sufficient assets to sell to substantially reduce it, means we will not reach sustainability without long-term support from Government to reduce our toxic debt burden.

“Whilst I am committed to taking the tough decisions necessary to reduce costs and improve efficiency in the council, this alone cannot meet the scale of challenge presented by our historic debt level. This is not something we will be able to fix alone.

“I welcome the work which is underway with your Officials to explore options for a resolution to this issue and I look forward to working with you over the coming months to find a solution which both allows Croydon to return to financial sustainability and protects the public purse.”

The mayor went on to say the issue of the council’s debt needs to be “resolved by the Autumn” so the council can start preparing its budget for 2024/25.

He asked Mr Rowley for a six monthly meeting for a review of the progress.

The committee will meet from 6pm at Croydon Town Hall on Tuesday (June 6).