Cllr Meirion Jenkins is the shadow cabinet member for Value for Money and Efficiency on Birmingham City Council. He was the Conservative Candidate for Bridgend in the 2015 General Election.
Labour has “bankrupted” Birmingham. Of course, in the UK a city cannot go bankrupt in the sense that we understand in the private sector (perhaps it should?) but saying that Labour has bankrupted Birmingham is a useful and reasonable simplification of what has occurred for explaining the situation to the public. We all know that eventually, the government will have to bail the city out, but first the city council must do all it can to fund the losses it has incurred through dreadful management of public funds. Non-statutory services will have to be cut to the bone, Council Tax will increase, probably by about ten per cent for multiple years, with the government having to give Birmingham permission to increase Council Tax by more than two per cent without a referendum. Then the city will have to sell its assets and there is considerable disquiet from residents about the prospect of legacy assets being lost forever.
When all this is done, if there is still a gap, which, on current forecasts there probably will be, then the Government will have to print imaginary money to loan to Birmingham. It seems inevitable that the pain will fall not on those who elected Labour for the last 10 years but on their children and their children’s children. In any event, with around 80 per cent of Birmingham’s budget being funded by central government, there is a limited connection between those that pay the tax being squandered and those who elect Labour to power in Birmingham. There are about 330,000 households in Birmingham versus a population of 1.1 million, with around 740,000 registered voters. Of course, under the influence of the unions who dominate politics in Birmingham’s Labour group, it’s hard to know how a future Labour Government might treat Birmingham.
Although the Labour administration in Birmingham has been financially incontinent and chronically incompetent for years, the two situations that have triggered the crisis are the equal pay liability and the failed Oracle (ERP) accounting system implementation. Having been on the Audit Committee for most of the last ten years, you might think I would have had a ring-side seat for these knockout disasters. Well, I would have, if Labour hadn’t treated the Audit Committee with contempt and disgracefully kept it in the dark.
I have spent my whole career in the ERP (accounting systems) industry. In March 2020 , I was asked to report to scrutiny on the risks associated with the Council’s decision to implement a new Oracle accounting system. I sent a letter to the then chairman of scrutiny and former leader, Sir Albert Bore. Although the Cabinet, on the face of it, adopted my recommendations, in practice they were all but ignored. Contrary to good practice, instead of adapting the council’s accounting procedures to the standard functionality in the new software, the council attempted to adapt the new software to their legacy procedures. This included, for example, commissioning a bespoke bank reconciliation programme. This has been disastrous, with the council now unable to properly reconcile its bank account and some 30 people currently employed to manually allocate incoming payments.
Even with 30 people on the job, the external auditor has told me that the situation is getting worse, the implication being that even more than 30 people may be needed. The council’s inability to extract reliable information from the accounting system, means, for example, that the auditor was not able to answer my question as to whether two accounts, which by law must be kept separate (housing and general fund), have become cross-contaminated. There have been cases of teachers having to use personal credit cards to pay suppliers because of the council’s inability to operate the purchase ledger correctly. Officers are maintaining records in various peripheral systems such as spreadsheets, which, in my experience, is very likely to lead to inconsistency of data.
From time to time, an auditor will ‘qualify’ a set of published accounts, i.e. where there are certain aspects of the published accounts that cannot be verified to their complete satisfaction. In the case of Labour Birmingham’s latest accounts, the auditor is not only talking about a qualification, but questioning whether the information available from the accounting system is so unreliable that it may not be possible to produce a set of accounts with sufficient accuracy to publish at all. Imagine that, Europe’s largest metropolitan authority, with a question mark as to whether they will be able to produce any accounts for a given accounting year!
One of the difficulties, perhaps even the main cause of all this, is that Labour in Birmingham has never embraced the role of scrutiny, much less the vital regulatory role that audit committee should play. Labour has no regard for transparency, always trying to keep difficult or embarrassing information away from the daylight. It has been a constant struggle to obtain access to documents which should rightly be in the possession of audit committee. We even passed a motion at full council to say that Audit Committee should have access to all documents throughout the Council, but the Labour administration has simply ignored this motion.
Obviously, embarrassment is not a reason for denying audit committee access to documents. Secret documents have included termination arrangements with officers and reports from external solicitors into scandalous failings in the service provided to children with special needs. (Children being taken to school in uninsured vehicles and driven there by at least one convicted sex offender.) Payments to GMB members that led to the second part of the bin dispute and a cabinet member resignation are another example, with the said cabinet member urging the leadership to be more open and publish private documents.
Even where Labour do kindly allow the Audit Committee access to information, all too often and without lawful justification, they insist on moving reports into private session, thereby keeping proceedings secret from the press and public. I generally vote against this but am always outvoted by the built-in Labour majority. So often it turns out that little or no information was discussed in private that would have justified the exclusion of the public.
Worse still, the Audit Committee was kept in the dark over both equal pay and Oracle. It was not brought to the committee’s attention for several months when it became known that significant equal pay liabilities had been identified and, almost unbelievably, full council was allowed to pass what appears to have been an unlawful budget (Feb 23) even when the administration knew that the liabilities were significantly understated. Having paid out around £1.2 billion for equal pay up to 2017, these new equal pay liabilities are estimated to be an additional amount of approximately £750 million – although the auditors have said the figure could exceed £1 billion.
Even though the Audit Committee was receiving assurances that any difficulties with the Oracle financial implementation were predictable teething problems, I discovered by reading a Birmingham newspaper how serious the situation actually was. That’s right, audit committee members found out about an unfolding disaster from a newspaper, even though the seriousness of the situation was becoming known in late 2022. The budget for implementing Oracle has grown from about £20 million to £100 million and the whole project is now a consultants’ feeding frenzy.