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Birmingham’s cash-strapped council will be forced to sell £750mn of assets and make cuts to public services of £300mn in order to claw its way out of a deep funding crisis, the council said on Monday.
The town hall has also been given exceptional authorisation by the government to raise council taxes in April by 10 per cent.
Labour council leader John Cotton said he was presenting the budget, which would result in steep cuts to frontline services including child and adult care, with a “heavy heart”.
“I wish to apologise unreservedly for the significant spending reductions and council tax increase — we have no choice but to face these challenges head on. We will do all we can to get the council back on to a stable and sound financial footing,” he said.
Birmingham is the UK’s second-largest city with the second-largest single tier council in Europe in terms of the number of people it serves and services it provides. It is one of eight local authorities in England in recent years to have issued section 114 notices declaring an inability to meet a legal duty to balance the books.
But its demise has focused attention on the wider squeeze on local government finances and associated deterioration in public services across England.
“This is a very big authority. So the numbers are so much bigger,” Max Caller, the government-appointed commissioner who was sent in last year to take control of the city’s finances after the council was forced to declare that it was in effect bankrupt, told the Financial Times.
The council was pitched into insolvency last year when estimated liabilities for equal pay claims from several thousand mostly female employees jumped to nearly £800mn.
But experts in local government also pointed to the wider national picture, with council funding cut to the bone in the decade to 2020, hitting large urban areas such as Birmingham particularly hard.
The County Councils Network, representing the largest local authorities in England, said on Monday that nearly all of its 36 members would have to raise council tax by the maximum allowed 5 per cent in April. This was in spite of the government granting £500mn in emergency funding last month.
“We have little choice but to take the difficult but necessary decision to raise council tax by 4.99 per cent to continue to protect services and ward off the threat of financial insolvency in the future,” said Sam Corcoran, vice-chair of the CCN.
Some experts are warning that coming on top of previous cuts, the latest ones in Birmingham risk tipping the council into a vicious cycle of rising costs and falling revenues.
James Brackley, from the Audit Reform Lab think-tank at Sheffield university, said that tens of millions of pounds were projected to come out of child and adult social care, and homelessness services, with huge potential knock-on costs down the line.
“We are worried this sets them on a footing where they are not financially viable at all anymore,” he said. “It all feels a bit scorched earth.”
