Birmingham outlines £150m of cuts

Birmingham City Council has outlined nearly £150m of proposed savings as it tries to plug a £300m budget gap.

The council’s children and families department could see the biggest reduction to their budget with £57m of savings proposed.

City operations could see a cut of £29m, while adult social care could see their budget reduced by nearly £22m.

Council management is facing a nearly 50% budget decrease of around £15.6m.

The local authority was forced to declare itself effectively bankrupt in September and is facing a £87.4m overspend for 2023/24 and a budget gap of around £300m by 2025/26.

Cllr John Cotton, leader of Birmingham City Council, said: ‘The council is in an unprecedented situation as we need to find in excess of £250m savings over the next two years. As well as having to reset our finances we have to fundamentally change how we deliver services.

‘No detailed decisions have been made at this stage and there will be a consultation period so we can hear the views of residents and businesses. However, we have been clear that we will have to make very difficult decisions given the financial challenge we face - to do otherwise is not an option.’

A public inquiry into Birmingham City Council’s decision to issue a bankruptcy notice has been called for by financial experts.

An open letter to Community Secretary Steve Reed has been signed by 35 accounting experts and academics, raising questions about the section 114 notice issued by the local authority in 2023.

The letter claims that the notice was based on ‘unaudited’ and ‘materially incorrect’ accounting information.

In a supporting analysis, Dr James Brackley, a lecturer in accounting at the University of Glasgow, argues the council ‘appears to have both overstated its project budget deficits and materially underestimated its available funds’.

Dr Brackley said: ‘The accounts of Birmingham City Council now show that Birmingham was likely never bankrupt, with the scale of the accounting misstatements that led to the bankruptcy looking absolutely unprecedented.

‘There should now be an immediate pause on the council's asset sales programme and urgent questions must be put to Commissioners as to when they knew about the council's much stronger financial position and whether elected members and the wider public were misled.’

However, Birmingham City Council Commissioners have argued that claims that the council was in reasonable financial health are ‘entirely incorrect and based on a flawed analysis and a fundamental misunderstanding’.

They argue that it is only since the statutory intervention that the local authority has managed to make progress with its financial issues and, in particular, its equal pay liability.

Council leader Cllr John Cotton said: ‘My focus over the last two years has been on dealing with equal pay, the re-implementation of Oracle and with tackling a huge budget deficit. We continue to make progress on all three.’

He continued: ‘We're working with a Labour Mayor and a Labour Government to repair the damage of 14 years of crippling Tory cuts that cost Birmingham over £1bn, and under my leadership, this council has taken the tough decisions and decisive action required to return to the mainstream of local government.’

An MHCLG spokesperson said: ‘Birmingham City Council has made progress on its reform and recovery, but challenges remain, which is why commissioners continue to support the council to deliver for local people.’