Emergency measures aimed at managing Birmingham City Council's dire financial situation are expected to be announced by the UK government. The council, facing severe
financial challenges, is believed to be on the verge of bankruptcy. Levelling Up secretary Michael Gove is expected to announce government intervention, outlining the initial steps to address the crisis.
The primary financial issue plaguing the council is a £760 million bill to settle equal pay claims. This financial burden has been steadily increasing at a rate of £5 million per month, reaching £14 million monthly. Birmingham's Labour leader, John Cotton, has engaged in discussions with Michael Gove and maintained communication with his department and the Local Government Association to seek assistance in resolving the city's challenges.
However, a government source has disclosed that the council's difficulties are more severe than previously thought. They have accused the authority of failing in its fundamental responsibilities. In addition to the equal pay settlement, the council is grappling with a projected budget deficit of £87 million.
In response to its fiscal struggles, the council recently announced a halt to all new spending, except for essential services mandated by law, such as education, social care, and waste collections. Notably, the list of non-essential services that will be affected has yet to be disclosed.
Birmingham City Council is expected to request "exceptional financial support" from the government. This support may involve permission to borrow funds to manage its debt or the sale of assets, including properties and land, to generate the necessary funds to address its financial obligations. The prospect of selling off assets has prompted speculation about which properties and land might be sold.
Prof Tony Travers of the London School of Economics noted that asset sales would not provide immediate relief for annual budget constraints but suggested that the government could allow Birmingham to capitalize spending designated for equal pay claims. This would enable the council to use revenue from asset sales to cover these liabilities.
Councillor Robert Alden, the Conservative opposition leader in Birmingham, criticized the Labour administration for failing to address the issue adequately and called for greater transparency regarding equal pay claims. He argued that the council had ignored concerns raised by the opposition, officers, auditors, and trade unions, leading to their current predicament. Photo by Richard Rogerson, Wikimedia commons.