Government sending in officials to run Birmingham

By Vanessa Pearce & Rob Mayor

BBC News, West Midlands

Emergency measures to help run Birmingham City Council during its financial crisis have been announced by the government.

Commissioners will oversee the effectively bankrupt authority, with powers to make decisions directly.

Levelling Up secretary Michael Gove told the Commons that senior leadership figures in Birmingham had “harmed the city”.

A local inquiry was also set to be launched, he said.

The council is facing the prospect of a £760m bill to settle equal pay claims.

It has also warned the bill is increasing by £5m to £14m each month.

The government was prepared to extend additional financial support to the city, Mr Gove added, but warned of “tough decisions” ahead, with a hike in council tax and a sale of assets each a possibility.

“Poor leadership, weak governance, woeful mismanagement of employee relations and ineffective service delivery have harmed the city,” Mr Gove told Parliament.

“I do not take these decisions lightly, but it is imperative in order to protect the interests of the residents and taxpayers of Birmingham, and to provide ongoing assurance to the whole local government sector.”

The commissioners, he confirmed, would have the means to make decisions directly, if needed, and the inquiry would consider “the more fundamental questions” of how the city got into its position.

The council had to prepare, and agree, an improvement plan within six months but had only five working days to make representations, Mr Gove announced.

Responding in the Commons, Angela Rayner, shadow Levelling Up secretary, said a “crisis” in local government had been caused by “the Conservatives’ wrecking ball”.

“With every swing, another local council is pushed to the brink and another local community falls over the edge,” she said.

“And this isn’t a one-off. So can I ask [Mr Gove] what work his department is doing to support local authorities that are warning of financial distress now?”

The leader of Birmingham’s Labour administration, John Cotton, said the authority would now work with the government to get the council back on “a sound financial footing”.

He had been concerned there was a lack of senior capacity at the council “to deal with the issues that we faced”, he posted on X, formerly Twitter.

The council is also facing a projected deficit of £87m in this year’s budget.

As a result of the inability to balance the books, it earlier this month announced that all new spending would cease, although services it had a statutory duty to provide – including education, social care and waste collections – would continue.

Two months before the issuing of that Section 114 notice, which formally outlined the constraints, the council said it had taken the decision to stop spending on all “non-essential” services. What those are have yet to be announced.

An extraordinary general meeting of the full council is due to be held next Monday to discuss a financial recovery plan.

In a report released ahead of it, chief executive Deborah Cadman said work to address problems “must be urgent, will involve hard choices about what we deliver and how we operate and will result in a smaller organisation”.

• Under the Local Government Finance Act 1988, if a council’s chief financial officer believes the authority cannot meet its expenditure commitments from its income, they have to issue such a notice
• They do not need the consent of councillors to do so
• Local authorities in the UK cannot go bankrupt but the issuing of the notice is often described as “being effectively bankrupt”, meaning they cannot make new spending commitments and must meet within 21 days to discuss next steps
• No new expenditure is permitted with the exception of funding statutory services, including safeguarding vulnerable people, but existing commitments and contracts will continue to be honoured
• Most councils in such a position pass an amended budget, reducing spending on services
• Thurrock, Croydon, Slough and Northamptonshire have issued section 114 notices in recent years

The council has already paid out more than £1bn in compensation to underpaid workers.

The settling of claims in 2012 followed a court ruling that found hundreds of mostly female employees, working in roles such as teaching assistants, cleaners and catering positions, missed out on bonuses given to staff in traditionally male-dominated roles such as refuse collectors and street cleaners.

In June, it emerged there was a further £760m equal pay liability – a sum equivalent to the entire annual spending on services and no means to meet the bill.

Financial support from the government could take the form of permission to borrow money to service debt, or sell assets, such as buildings and land, to raise cash to deal with its financial liabilities.

This has led to speculation over which assets could go.

When asked in Parliament whether the commissioners’ powers would extend to decisions to raise council tax and sell assets, Mr Gove said: “It has sadly been the case in the past with local authorities that have failed, like Croydon and like Slough, that we have needed both to increase council tax in certain circumstances and to dispose of assets.”

But he added it was too soon to say what interventions would be required.

Prof Tony Travers, visiting professor in the London School of Economics’ Department of Government, told the BBC that selling off assets “would not provide money immediately to relieve ‘annual’ budget pressures”.

But he said the government had in the past allowed Birmingham to “capitalise” spending earmarked for equal pay, meaning the council could use the money from asset sales to cover such liabilities.

Councillor Robert Alden, leader of the Conservative opposition in Birmingham, said residents deserved better and called for more transparency from the authority over equal pay claims.

The Labour administration had “failed to get a grip” of the issue, he said.

“The problem is the council hasn’t listened; they haven’t listened to the opposition, they haven’t listened to the officers, they haven’t listened to the auditors and they haven’t even listened to the trades unions who have all been raising concerns with them because they have put their heads in the sand instead of facing up to the mess they’ve made.”

The GMB union called on the authority to compensate women affected by inequalities in pay.

“The quickest, cheapest and fairest way to get a grip of the crisis in Birmingham is to work with GMB to end the discrimination and [to] compensate the women,” said Rhea Wolfson, the union’s head of industrial relations.

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