‘Bankrupt’ Birmingham- for those who want to understand what has happened:
Situation:
Birmingham City Council settled Birmingham their first Equal Pay dispute between staff in 2012 paying £1.2b 11 years ago. Since then it has been revealed Council did not take action to deal with these discrepancies in contracts which first caused the Equal Pay dispute for a further ten years whilst it was in control. This is despite there being a cabinet report telling Council how to deal with it.
Regrettably the Labour administration has not dealt with and has ignored warnings from their own GMB union and many others- for ten years. It is their inaction and wilful mismanagement which has created this new second liability of £760m over 6 years+
Is Council Bankcrupt?
No. Services will continue, staff will continue to be paid, statutory oblications fulfilled and contracts honoured. There is currently (septemer 5th) however a freeze on all future spending to ensure the city’s finances do not worsen, effectively to steady the ship while cuts to services will be decided. The S114 notice is the decision of an independent finance officer stating that the Council are unable to meet it’s future financial committments.
Cuts to Council are to NOT blame:
Yes councils have faced significant cuts, (around 40% from it’s peak) but not dealing with the city’s Equal Pay claims a second time has nothing to do with cuts to the budgets of Councils. This new liability- equal to the entire revenue for the whole council for a year- is entirely self caused by the administration ignoring an issue for ten years when they were aware of it’s existance.
Birmingham’s situation is also unique- a second #equalpay bailout, plus significant financial mismanagement over years.
Finally- multiple reports do not link EqualPay with Council Budget Cuts:
-Council declared a few months ago the city’s finances were the best they have ever been and heralded a golden decade. A few months later they are bankrupt.
– The S114 clearly says it is not due to funding cuts from Government.
-The GMB Union and others state that the Equal Pay crisis is not due to Government cuts.
– The national labour party themselves wrote a report saying the problems in Birmingham were not due to funding issues from central.
Financial mismanagement:
What is relevant is Council’s inability to manage it’s finances.
There has been money coming into the city. 2023-24 the Government has provided £5.1b to councils which is more than 9% increase for Birmingham. This is in addition to money for the Commonwealth Games and Covid support.
Meanwhile, 2023-24 Budget is not balanced and is running a deficit, cost savings not materialised with £60m identified as high and medium risk of non-deliverablity. Money has also been wasted and mismanaged.
– BCC sold the NEC for 307m 2015 to help pay for the first Equal Pay settlement. It was resold for 800m three years later.
– They built a £560m athletes village for the CWGames2022- that didn’t house a single athlete.
– A new IT system now 3years delayed and costing 5x the original amount.
Who is responsible?
Talk of Council cuts is a distraction to the real issue- how has the largest authority in Europe gone bankrupt and who is responsible? The one constant throughout has been Cllr Cotton. He was first in the cabinet in 2012, in charge of the city’s HR for the last year, has sat on Equal Pay meetings and is now claiming he only knew about this a few months ago. To me that is either misleading or incompetence.
What will happen?
Services will be cut, council taxes will go up, there will be redundancies and a freeze on all new spending. It will be the most vulnerable residents in the city- disabilities, the elderly- and preventative works that will be the most affected in the city while the city will now be plunged into incredible uncertainty- and it will go on for years.
This is a desperately bad situation, and it is worsening by around £14m every month. however, in the search to understand the next steps, we are forgetting how has this been allowed to happen and who is responsible. Residents need answers and accountability.
Of course the government must step in to fix their incompetence, but it is ultimately every tax payer in the country that will be bailing Birmingham Labour out here.