City council’s proposals to change tack over path to recovery

Earlier this year, the Labour-run council sent shockwaves through the city as it passed an unprecedented budget which included a huge wave of cuts to local services.

Months later, in August, a report claimed the council’s financial problems were misdiagnosed and that tens of millions of pounds of cuts and tax rises could be avoided.

It argued the problems were primarily due to the “disastrous implementation” of a new Oracle IT system, alongside central government cuts and increased demand for services.

The Audit Reform Lab think tank went on to call for a full and independent inquiry and a new recovery plan for the city.

Dr James Brackley, lead author of the Audit Reform Lab report, said at the time: “The new UK government should urgently restructure the council’s financial support, capitalising it against the Oracle IT disaster rather than the speculative equal pay liability.

“This would give Birmingham longer to balance the books.”

In a new update issued this week, minister of state for local government Jim McMahon confirmed he had received “high level proposals” from Birmingham City Council (BCC).

He said these were for some changes to the “detailed approach to returning to a balanced financial position”.

“I will be considering these proposals and asking my officials to discuss them with the council and commissioners in assessing their deliverability,” he continued.

But he added it was “imperative” the council continues with making “important and timely decisions at this critical stage”.

The Labour MP was responding to a recently published report by the Birmingham commissioners who were sent in by the previous Conservative government to oversee the council’s recovery.

The first of the commissioners’ six-monthly reports, from this April, set out the pressing issues within the council, saying: “The path to recovery is long but it is also narrow.

“BCC must take very careful steps, in a deliberate order, before it first secures financial stability.”

They continued that there were three critical issues that needed addressing during the next two years.

These were:

The equal pay liability and providing a fair settlement to workers.

The savings programme to reduce the council’s budget by around £300 million.

The council needs to release assets to sell to realise £500m in the next 12 months and a further £250m in the subsequent year.

“If the council fails on any of these three challenges, BCC’s viability as an organisation will be in doubt,” the commissioners warned. “[Achieving this] will require iron-clad discipline and determined, ambitious political and officer leadership.”

Responding to the report, John Cotton, leader of Birmingham City Council, said: “We acknowledge that while progress is being made, there is much more to do in our ongoing efforts to ensure we become a financially sustainable, well-run council that delivers good services.”

“We continue to engage constructively with the new government, and like councils across the country, are awaiting both this month’s budget settlement and a local government finance settlement later in the year which will set out a one-year emergency package of support for local councils.”

He said the government was also committed to a multi-year settlement following next year’s spending review, which could give councils “much-needed clarity” and allow them to plan for the future.

“Nevertheless, we face another very difficult budget, and it remains clear the pace of change must further increase, as further savings are identified, and we transform services,” he added.

Amid the financial woes in Birmingham, Coun Cotton has previously pointed the finger at “14 years of neglect from the previous Tory government” while Conservative politicians have highlighted the mistakes made by the Labour administration at the council.