Birmingham’s Path To Financial Recovery
Councils across the country are well into budget setting season and, despite the last-minute announcement of a £600m cash injection from the government, very tough choices are having to be made. For some councils the challenge is especially acute and over recent months none have been in the headlines as much as the country’s biggest council, Birmingham.
In 2023, Birmingham City Council suffered the ignominy of having to issue not one but two section 114 notices. An effective bankruptcy order meaning that a council can no longer meet its financial obligations and needs government assistance. The root of the financial problems at Birmingham City Council is an equal pay claim that has been building up for decades and which will cost the council £760m to settle. An IT contract that ballooned in cost by £80m is also contributing to the pain but would have been manageable without the pay claim.
The council’s leadership team and government-appointed commissioners have spent recent months putting together a budget for 2024/25 and next week, the cabinet will agree on the level of council tax for Birmingham bill payers for the next year. Following agreement from the government, the council has been permitted to set that rise at 10% without the requirement to hold a referendum. It is now inevitable that this large rise will go ahead and will be accompanied by some large very cuts to local services. It will be little comfort to the people of Birmingham, but it is worth noting that even with this 10% rise Band D council tax bills will still fall within the average range for councils in England and will still be around £350 a year lower than the Band D charges set in the highest charging council areas.
To compound these financial problems, Birmingham is a city with acute levels of deprivation where council services are desperately needed. The council, the largest in Europe, is the seventh most deprived local authority area in the country. One in four residents live in income deprivation. The constituency of Birmingham Hodge Hill has the highest fuel poverty rates, the highest child poverty rates and the second highest unemployment rate of any constituency in the country.
The good news is that the council has a strong leadership team with John Cotton determined to turn the situation around and a chief executive and director team who are among the best in the country. The combined authority and Mayor of the West Midlands Andy Street (up for election this May) will have a big role to play as well. The key for all will be to stimulate growth and regeneration in sustainable ways that benefit the council coffers and include the hard-pressed residents.
That the city is open for business is not up for debate. The politicians in the area are still smarting from Rishi Sunak’s decision to stop HS2 from extending north of Birmingham but the line will still join the city up with the centre of London. Government and private sector investment is still flowing in. Improvements to local public transport systems including the extension of the tram network will boost productivity., in addition to investments in other areas such as broadband and 5G networks.
These programmes will help the council to raise funds through the sale of property assets that are holding their value despite uncertainty around the national economy. Nurturing and developing partnerships with the private sector will also be vital. The council simply cannot deliver big projects alone now. They will need institutional investors and proven business partners on board to deliver schemes that can both alleviate cost pressures in areas such as housing, children’s services and health and social care while generating long term revenue streams through rental income.
As we’ve noted before, there are huge opportunities waiting in Birmingham for those with the imagination, drive and resources to deliver projects in the city. The council may still face a bumpy ride on the road to a better future but only a fool would write off the country’s second city and its ability to bounce back from its current travails.
