Croydon Council could have to shell out even more for debt repayments as interest rates soar.

The authority is still in discussions with government to get an unprecedented write off of some debts as it battles to get its finances back on track.

More than £500million of short-term loans are set to be refinanced from this year, putting the council at the whim of Bank of England interest rate rises. In a bid to tackle inflation, the bank increased interest rates from 4.5 to 5 per cent, a 15-year high.

The council has a total of £1.3billion of debt which costs around £50m a year to pay back. £545m of this was borrowed between 2017 and 2020.

According to a report from the council’s director of resources, Jane West, the majority of this debt will need to be refinanced from this year onwards meaning the council will most likely face higher interest rates.

Ms West wrote: “With circa £1.3bn of General Fund debt and an environment of rising interest rates, the delivery of an effective Asset Management Plan and an ambitious Asset Disposal Strategy, including reducing the number of buildings used by the council, will be essential to mitigate rising cost pressures, reduce the overall debt burden and help the council balance its books.”


Croydon Council has asked the government to help it reduce some of its debt. It has asked for a total of £540 million to be written off. Mayor of Croydon Jason Perry told the Local Democracy Reporting Service conversations with the government are still ongoing.

He said: “I think government appreciate that we have to have a resolution this year when we go into the budget setting for next year. Having said that, we are the first local authority who have said ‘can you help us out here’ in the form a debt write off, or interest reductions.

“There is also the moral hazard of other local authorities in similar positions queuing up behind to get the same treatment. They are trying to find a process to deal with this situation so they can also deal with any other boroughs.”

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”.

In April, Croydon was also given 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.