Birmingham's financial woes continue into 2025 amid another tough budget

2024 was marked by the fallout from the crisis-hit authority passing through an unprecedented and painful budget amid a black hole in its finances.

Last year saw featured cuts to local services; a council hike of nearly 10 per cent; calls for a public inquiry; and a Labour administration saying action is being taken to rectify past mistakes.

One month into 2025 and Brummies are arguably seeing more of the same.

There was a fresh wave of concern in January after a council report acknowledged that ‘savings’ of £153 million were needed for the 2025/26 budget.

It also confirmed that the Labour-run council plans to increase council tax by 9.99 per cent for the second year in a row.

And then the controversial Perry Barr residential scheme, recently revealed to have caused a “significant financial loss” for the council, has led to new calls for a public inquiry.

Following the damning revelation about the project, council deputy leader Coun Sharon Thompson said there were “difficult lessons the organisation needs to learn” and that “governance processes are being strengthened” to ensure mistakes are not repeated.

With all that in mind it’s clear that despite the progress being made with the authority’s recovery plan, the financial woes at the council are far from over yet.

Another tough budget

A recently-published council report said ‘savings’ of £153 million were needed for the 2025/26 budget.

The detailed budget will be revealed in the coming weeks but savings could impact areas such as adult social care, children’s services and city operations.

Coun Rob Pocock, the cabinet member overseeing the council’s transformation, told a meeting this week that “another tough budget” has to be agreed and delivered.

On a more positive note, council leader John Cotton said “significant progress” had been made on getting the authority back on track.

“The progress of the last 12 months will be maintained and the savings for 2025/26 will be backed by detailed and credible delivery plans that have undergone rigorous due diligence,” he said.

But Roger Harmer, leader of the Liberal Democrats at the council, criticised the impact of the previous raft of service cuts and said he feared for the future of the city amid the prospect of more.

“The truth is this is being done on the back of a much dirtier city with savagely-cut services,” he said.

“I can’t be the only councillor that’s really noticed a change in the tone of emails I get from residents really, really concerned about the state of the city.

“It’s only going to get worse.”

Council tax

With a second council tax increase of 9.99 per cent on the cards, opposition councillor Robert Alden said Brummies now face “another double whammy“.

The leader of the Conservatives at the council continued that residents could be “paying higher council tax for fewer services in the year ahead”.

Conservative councillor Richard Parkin (Sutton Reddicap) also reacted to the financial update this month, saying the news “has been nothing short of disastrous, even by their [Birmingham City Council’s] low standards.”

On the proposed second council tax rise of just under ten per cent, Coun Karen McCarthy, the cabinet member for finance, said: “The opposition really can’t have it both ways at once.

“You can’t have made hay with that figure for a year and then act surprised when that’s what appears in the report.”

Towards the end of last year, council leader John Cotton said: “Regardless of what decision we may take, the council tax support scheme remains in place which provides protection to around a quarter of the city’s households, with the poorest being completely exempt from paying council tax all together.

“That protection will remain in place.”

Perry Barr controversy

Adding another layer to the council’s financial turmoil is the athletes village project in Perry Barr.

A former council leader claimed back in 2018 that it would help rejuvenate the area and create a “meaningful legacy” from the Commonwealth Games.

It was originally planned for the village to house thousands of competitors during the Games before being converted to much-needed housing at a later stage.

But it has proved problematic for the city council during subsequent years.

The decision was made to scrap the village back in 2020, with development restrictions during Covid being blamed, and the site and its flats remained eerily empty as recently as last year.

A report published this month has now revealed that the development scheme will make a loss of around £150 million.

Commissioners, previously brought in to oversee the council, described the management of the Perry Barr scheme as “deeply flawed” with “major financial consequences”.

The worrying findings of the report were met with a barrage of criticism this week, with Coun Alden describing it as “one of the most damning reports into a decision taken by anywhere in local government, let alone here in Birmingham.”

He reiterated he wanted to see a full public inquiry into the management of the project.

Coun Harmer meanwhile described the report as “truly shocking” and questioned why mistakes were made while joining calls for an inquiry.

Deputy leader Coun Thompson acknowledged during the cabinet meeting that the report made for “uncomfortable reading”.

“But also it really highlights the fact that we need to make sure that we are seeking proper guidance and cabinet are given the right types of information,” she said.

“Over the last year or so, we have been talking about the need to look at governance, to look at risk and everything else in terms of our processes.

“We are very clear that is the journey we are going on and that is a part of the transformation that we need to make as an organisation.”

Last year’s alarming budget was agreed amid issues including an equal pay fiasco and the disastrous implementation of a new IT and finance system, as well as the rising demand for services and funding cuts.

The political blame game has seen figures such as Coun Cotton pointing the finger at the previous Conservative government while Tory politicians have highlighted the mistakes made by the council’s Labour administration.