Birmingham councillors shocked and ashamed by damning report that exposed reason for financial downfall

External auditors Grant Thornton highlighted the mistakes and failings which plagued the crisis-hit council ahead of it effectively declaring itself bankrupt in September 2023.

What followed was an unprecedented wave of cuts to services alongside plans to raise council tax by around 20 per cent over two years.

Among the critical issues highlighted by auditors were the ‘crippling’ failed implementation of a new IT system; ‘inadequate’ housing services and a failure in services for children and families with special educational needs and disabilities.

They also said alleged equal pay liabilities had resulted from “serious mismanagement in the waste and street-scene services”.

“Ultimately, the lack of timely information on the severity and implications of the emerging issues has hampered the ability of senior management and members to intervene effectively,” the report read.

“This appears to have been made worse by a culture in the organisation of not reporting or being receptive to bad news, an over-emphasis on protecting personal reputations and a lack of challenge and rigour in governance.”

The report came in the same month as two others – one on the “inaccurate” 2023-24 budget and another on the Perry Barr housing scheme which caused a “significant financial loss”.

Both issues feature in the report by Grant Thornton, which covers the Labour-run council’s finances for the periods 2021-22, 2022-23 and 2023-24.

Speaking at an audit committee meeting this week, Liberal Democrat councillor Paul Tilsley CBE (Sheldon) said he read the auditors’ report with a “dropping jaw”.

“We have to overcome these issues we’ve got,” he said. “It’s a very, very sad indictment of the heritage that Joe Chamberlain [former Mayor of Birmingham] left us.”

Conservative councillor Richard Parkin (Sutton Reddicap) agreed the report was “jaw-droppingly bad”, saying: “It’s hard to know where to start with this one.

“How can we have any confidence that anything is going to change given the history of things being ignored?”

“I read [the report] and I feel ashamed,” Coun Liz Clements (Bournville and Cotteridge) added. “We absolutely need to own the mistakes and do all we can to learn from them in the future.”

The report by Grant Thornton also put a spotlight on “weaknesses in culture” within the council, saying there was a difficulty in speaking up about and hearing bad news.

“We note that in our interviews with previous senior officers, a number cited mental health issues following what they considered to be inappropriate behaviour during their employment at the council,” it read.

“Two declined to be interviewed due to their anxiety in discussing past events.

“It appears unlikely the council will improve its governance until it develops a culture that supports individual and collective accountability and responsibility.”

Coun Clements said during the meeting that she was concerned by the “climate of fear” highlighted in the report.

“We’ve got to change and improve,” she said. “Despair or giving up is not an option.”

The report concluded the council’s financial position was the result of numerous complex matters, including the alleged equal pay liability, inadequate budget setting, poor service management, demand led pressures, assumptions and delivery, and the loss of financial control due to the failed ERP system implementation.

“It is not appropriate to single out or discount any of the matters,” it said. “Each has had a significant impact on the council’s financial sustainability.”

The auditors said they were “satisfied appropriate steps are being taken to address the severe financial position of the council.”

But they said the council’s financial sustainability would remain a “significant risk over the medium term”- but not so much as to warrant further action.

Coun Karen McCarthy, the cabinet member for finance, acknowledged the report doesn’t make for comfortable reading during the meeting.

“My mantra since I took this role on in May last year is that we want everything on the table and no hidden corners,” she said.

“That’s easy for me to say but for officers, that means supporting and managing teams.

“Coun Rob Pocock [the cabinet member overseeing the council’s transformation] and myself are absolutely determined that where there are transformation programmes, there will be robust governance and oversight.”