LONDON'S MOST DENSELY POPULATED DISTRICT DECLARES BANKRUPTCY

Croydon became the first area of the Great London to go bankrupt amid the pandemic. The municipal council of the district, located in the south of the urban agglomeration, has filed a de facto bankruptcy petition. The major center of the financial and cultural life of the British capital, which is home to more than 365 thousand people, has discovered a potential budget deficit of £ 66 million (6.7 billion rubles) this year.

The finance manager of Croydon Lisa Taylor has filed a notice with the council, meaning that from now on, all non-essential expenses of the municipality will be frozen, and the district authorities will provide only a minimal set of basic services. This happened after a month earlier, auditors presented their report, calling the state of the treasury the result of "collective corporate blindness, both in terms of the seriousness of the financial situation and in terms of the urgency with which it was necessary to take actions."

One of the local MPs, Chris Philp, hastened to call the actions of the Labor Party politicians based in the area’s council the reason for the bankruptcy.

He said that there was a financial hole in Croydon's budget in the form of a debt of £ 1.5 billion, which required an annual amount of £ 43 million to service. According to Philp, the Mayor of London Sadiq Khan had to solve emerging problems more actively, rather than hide head in the sand.

The leader of the Croydon Council, Hamida Ali, said that active negotiations with various ministers on the issue of financial support for the region are underway. In her opinion, the coronavirus crisis and the last difficult decade had a significant negative impact on the economic condition of the region.

Croydon is the sixth area of London most affected by the effects of the COVID-19 pandemic.

Experts point out that Croydon's announcement that a local government has declared itself bankrupt is the first time in recent years in England. The last announcement of this kind was made by Northamptonshire two years ago. According to the established rules, the local council is obliged to apply a notification if it finds out that the costs incurred in the financial year may exceed the resources required to cover them.

The established protocol for such cases requires a complete freeze of costs. Within three weeks, the district council will not be able to spend funds without the permission of the chief financial administrator, and in the event of an emergency announcement, it will be able to spend only those funds that go to the salaries of working personnel and in several other agreed cases.

The executive director of the Royal Institute of Public Finance and Accounting (CIPFA) said that the actions of the Croydon council were fully justified, as bringing the issue of bankruptcy to the public will reduce the amount of potential losses incurred by the financial system.