Exceptional Financial Support needed by Birmingham City Council

Birmingham City Council says it’s “likely” to require Exceptional Financial Support from the government, as it reveals its Financial Recovery Plan ahead of its extraordinary meeting on September 25.

It says given the scale of its equal pay liabilities such support is “likely to be required” as well as an agreement in place to capitalise on some of its revenue liabilities and to be able to repay the associated borrowing over a period of time.

Negotiations are in place with the Department for Levelling Up with the council looking for a loan after issuing a Section 114. Details need to be in place (at least in principle) by the end of February 2024 for the council to be able to set a balanced budget for 2024/25.

Further reports and decisions will be required on:

• Where spending will be reduced – leading to a revised Emergency Budget for 2023/24
• A Capital Strategy and Assets Review – to identify options to raise funds and minimise borrowing costs
• Redesigning the organisation “around citizens and within available resources” to achieve a Medium Term Financial Plan
• Generating additional income from council-controlled companies and traded services
• An Income Review to maximise sustainable income from all sources, including Business Rates, Council Tax, Grants and other income

Birmingham City Council said its “work to address the situation must be urgent, will involve hard choices about what we deliver and how we operate, and will result in a smaller organisation”.

Given the scale of the challenge, it expects implementation to be “lengthy” and there will need to be an “extended period of rigorous spending control and tight financial constraint”.

The council has faced mounting financial pressure after an overspend on its Oracle IT system as well as an equal pay liability bill of £760m, but has also outlined the underlying forces driving other overspends in its Financial Recovery Plan.

It has identified a budget shortfall for the current financial year (2023/24) of £87m, which is projected to rise to £165m in 2024/25; £177m in 2025/26, £172m in 2026/27 and £180m in 2027/28.

These challenges are said to include:

• Rising demand and complexity pressures in essential services, such as social care and SEND services for children which adds £56m to the 2023/24 budget gap.
• Rising costs of inflation, primarily general inflation on costs of premises, transport, supplies and services costs. In total, inflation adds £21m to the 2023/24 budget gap.
• Undelivered savings which were agreed as part of the 2023/24 budget process but which are now considered to be at high risk. In total, savings considered to be at high risk add £33m to the 2023/24 budget gap.

A further report and revised Emergency Budget for 2023/24 will be revealed at an Extraordinary Council Meeting in late October which will note equalities considerations, involve the Overview & Scrutiny Committees and undertake a public consultation.

The Council says that it “acknowledges that the current situation will create uncertainty and in some cases disruption, and unreservedly apologises.

“It is committed to ensuring that citizens, partners and our own staff are regularly updated on the current situation and its future implications”.