No criminal charges are to be brought against Croydon council officials following the ‘catastrophic’ failures which led to the authority’s £1.5bn bankruptcy in 2020, the Metropolitan Police has decided.

The investigation was launched after the council declared bankruptcy in 2020 due to a £1.5 billion debt and severe overspending.

The investigation followed two independent reports – the Penn Report which looked into the reasons for the council’s financial collapse and the Kroll Report, a forensic investigation into the governance concerns and potential wrongdoing in relation to the refurbishment of the Fairfield Halls – commissioned by Croydon Council. Mayor Jason Perry referred these reports to the police, highlighting what he described as “catastrophic failures in governance” under the previous council leadership.

After “thorough and detailed assessment” Scotland Yard concluded that there was no evidence to pursue charges of false accounting, fraud, or misconduct in public office.

A Metropolitan Police spokesman told Eastlondonlines: “Specialist detectives from the Met’s Special Enquiry Team have assessed allegations of fraud and misconduct in a public office received against the former Croydon Council Executive.  The nature of the alleged offences were complex and required careful consideration. After a thorough and detailed assessment, a decision was made not to take the matter further. The case will be re-opened should further investigative opportunities become available.”

The police determined that the actions or inactions of former leaders, including ex-council leader Tony Newman, a Labour councillor since 1994 who resigned in March 2021 and was then suspended by the Labour Party, and Jo Negrini, the former council chief executive who resigned in October 2020, did not meet the legal thresholds for considering charges.

Newman said in a statement to ELL: “Croydon was forced to issue a Section 114 notice because of a single ‘black swan’ event – namely the Covid shutdown, which choked the Council of revenue while adding enormously to its costs. It was a perfect storm, and the Council was unable to weather it because of years of underfunding and austerity across local government in Croydon and beyond. Whilst collectively mistakes were made, we acted at all times with integrity and honesty, and with the best interests of local citizens in mind. We are unsurprised by this outcome but relieved that we can put this matter behind us.” Negrini, who now works as a director of Arup, the design and and engineering company, has not responded to requests for comment.

The council said the police found ”potential wrongdoings, breaches of statutory duty and incompetance,” but added: ”These were highlighted as collective failings rather than individual.”

The Penn Report investigated the culture and leadership of the council, while the Kroll Report focused specifically on the mismanagement surrounding the £70 million refurbishment of Fairfield Halls. Both reports identified significant flaws in governance and financial planning, contributing to the council’s financial crisis. However, they did not provide sufficient evidence to justify a criminal case.

In response to the police decision, Mayor Perry said: “People in Croydon are angry that a handful of individuals that have failed our council through poor and reckless decision-making have been allowed to walk away whilst residents pay the price.” He acknowledged that while the investigations were warranted, they did not meet the evidentiary threshold for criminal prosecution.

In a statement, the council said: “The situation highlights the very limited powers that exist with which councils can seek to hold individuals to account.”

The reports will now be referred to professional regulatory bodies, including the Chartered Institute of Public Finance and Accountancy (CIPFA), for further action.

Mayor Perry has called on the government to introduce reforms that would allow councils to hold individuals in public office more accountable for financial mismanagement. He stated that the situation in Croydon is not unique and that better mechanisms are needed to prevent similar situations in other local authorities.

In response to the collapse, the council had issued a Section 114 notice, which halts all new expenditure and is meant to stop all but essential spending – making sure the council can continue to provide vital services to its most vulnerable residents, and has since been working to address the significant financial overspends.