I come to bury the socialist leadership of Birmingham City Council, not to praise it. Yet I start with a mild defence, on a technical point. The council is not really bankrupt. Councils are under a legal obligation to set balanced budgets. They are not allowed to run deficits – unlike the arrangement with the NHS, for instance. However, we don’t usually talk of an NHS Trust being “bankrupt” if it runs a deficit in a particular year. If over the course of a year, your savings diminished, or your overdraft increased, that would not necessarily make you bankrupt. Nor would a firm necessarily be bust if for a year it made a loss rather than a profit.
Since the wild profligacy of Ted Knight, Derek Hatton, and the rest of the “loony Left” councils in the 1980s, there have been relatively strict financial safeguards imposed on local authorities – for understandable reasons.
Yet there has been appalling mismanagement and wasteful spending by Birmingham City Council for many years. Its problems don’t only apply to paying for current spending in this financial year but that its interest bill on its debt continues to rise. General Fund Net Loan Debt on April 25th 2023 was £2,113.7 million. The total interest payments on General Fund debt paid in the financial year 2022/23 was £88.6 million. Those alarming figures do rather lend credence to describing the Council as broke – except that it also has a large number of surplus assets – including much unused land. That could be released for development to cut the debt and provide homes and jobs.
It is true that a few other councils have issued Section 114 notices – declaring that no extra spending beyond statutory requirements will be undertaken. These have included Conservative councils (Thurrock and Northumberland) as well as Labour ones (Slough, Croydon and Nottinghamshire.) But there are 318 unitary and “upper tier” authorities in England. Some are better run than others. Yet the overwhelming majority have managed to balance the books. So for the leadership in Birmingham to seek to deny responsibility, blame cuts in funding from central Government, and suggest it’s the same for everyone is quite false.
The Times reports:
“Announcing the decision to stop funding all but essential services, the leaders of Birmingham council pointed to the disastrous introduction of an IT system costing up to £100 million, five times the original budget.
“This came on top of liabilities estimated at between £650 million and £760 million to compensate underpaid female employees following a landmark legal case that has already resulted in payouts of £1.1 billion.”
I hope a rigorous look is given to the IT project. There is a danger of the “sunk cost fallacy” being applied – as it has with HS2. “Oh well, we’ve already spent £100 million so we had better go ahead and spend another £100 million…”
Cllr Shaun Davies, the Chairman of the Local Government Association, has sided with Birmingham Council. This represents a return to the impulse of the LGA to defend the indefensible. No matter how dire a Council’s behaviour, the LGA can be relied upon to make excuses for them. Very insulting to the great majority of the LGA’s members who have kept their affairs in order. He adds:
“This is not a party political issue.”
In a sense he is right. The Labour Party agrees their councillors in Birmingham have done a terrible job. This account is from Birmingham Live in May:
“A report citing allegations of misogyny, toxic division and infighting at the heart of Birmingham Labour has caused disarray – after the party’s national leadership ruled it was so damning they would now step in and decide the city’s next leader.
“It means the party’s national executive has effectively seized control of the city council after deciding the ‘status quo’ is not an option. In a move that has caused shockwaves, they have said they will appoint the next leader and deputy leader of Birmingham City Council, with local members not getting a say.
It’s left the local party and council in disarray, just as it is facing multiple challenges over the cost of living crisis, its finances and the state of its multi million pound IT system. The report also emerged on the day the council officially launched a vision of the Birmingham of the future.”
Cllr Meiron Jenkins has been documenting the litany of overspending on this site for years.
This is a Council with 2,221 children in care. That includes 201 in highly expensive institutional children’s homes, many of whom are in mainstream education – which is an indication that a foster care placement, or better still adoption, would be viable. Children’s Home placements cost over £100,000 per child per year and have exceptionally poor outcomes.
Birmingham City Council has found enough money to increase communications spending. In January it told me, via a Freedom of Information Request:
“Corporate Communications currently employs 15.4 F.T.E. staff. There are also 4.5 F.T.E. staff that look after content on the website, but are not regarded as comms staff, but rather Digital & Customer Services. In addition, there are also staff outside of corporate communications, within other directorates, who perform some comms tasks as part of their role e.g., social media, but are also not regarded as comms staff as this is not their main role within the council.
“£1.736m was spent by Corporate Communications in 2021/22, the budget for 2022/23 is £1.86 million.”
It employs another 11 staff for Equality, Diversity and Inclusion. What do they do? Put on courses that relatively few wish to attend. In the last financial year:
“There was an event on LBGTQ+ Inclusion in the Workplace open and advertised to all staff. The event was held on 19th May 2022 from 10am – 1pm where 65 staff attended
online. 3 hours x 65 attendees = 195 staff hours or 26.7 working days in total.”
Then, of course, there is the scandal of the 4,000 empty garages belonging to Birmingham City Council. Many could be replaced with homes. Apart from easing the housing shortage that could provide a substantial capital receipt and a number of new Council Taxpayers.
The Council might not be technically bankrupt. But the situation is sufficiently serious that Michael Gove, the Levelling Up, Housing and Communities Secretary, should send in Commissioners to run it without further delay. They should be given a clear brief to change the financial direction of the Authority, not just steady the ship. The highly paid Commissioners sent to run Liverpool have been pretty feeble.
The Section 114 notices should also be strengthened. Rather than stop new non-essential spending they should stop existing non-essential spending. If a Section 114 notice still allows Birmingham City Council to employ 15 press officers then there is something wrong with the Section 114 notice.
These sanctions are a means to an end. There must be no bailouts from central Government – that would be grossly unfair on the frugal if the profligate are rewarded. Nor should any further Council Tax rises be indulged. Band D in Birmingham of £1,905.73 is outrageously high.
Let me be clear in case the point has been missed. The problem for Birmingham City Council is not that it is taxing too little. It is not that is has been unfairly treated compared to other Councils. The difficulty is that it is spending too much. The solution is for it to spend less.