Birmingham City Council’s financial recovery plan ‘will help restore certainty and confidence’

Birmingham City Council’s financial recovery plan was approved by councillors at an emergency meeting last night as part of the city’s response to its devastating section 114 notice.

The notice was issued earlier this month after the impact of future liabilities related to the long-running equal pay claims means the city is effectively bankrupt.

Max Caller, who has previously led interventions in Liverpool and Northamptonshire, has been selected by Levelling-Up Secretary Michael Gove to head up a team of commissioners that will spearhead the response to the crisis.

Birmingham City Council’s director of finance, Fiona Greenway, who was appointed in April, highlighted there is a projected deficit of £87m in the current financial year – which was reported to the city council’s cabinet in late July – and a further £80m budget gap next year.

“Given the need to fund the Equal Pay liability the Council does not have sufficient reserves to address this in-year budget gap,” she said.

“I also have concerns over the speed and the effectiveness of the mitigations we have put in place to address the in-year budget challenges and the ability of us as a council to address our financial position. We must now make challenging financial decisions and stop non essential spending.”

The measures approved by councillors include to continue spending control measures until a balanced budget for 2024-25 has been approved by the Council.

The council will also seek exceptional financial support from the Department for Levelling-Up, Housing and Communities (DLUHC) and review its assets as part of a fire sale to raise funds.

Birmingham City Council chief executive Deborah Cadman apologised for the uncertainty that the section 114 notice has caused, but said the financial recovery plan “will help restore certainty and confidence in our ability to address the financial situation”.

She added: “Our work to implement the recovery plan is urgent. It will involve hard choices about what we deliver and how we operate and it will almost certainly result in a different organisation.

“However, with challenges comes opportunity, the opportunity to improve our performance in several key areas for the benefit of our citizens and to restore our finances. Our recovery plan will take time [and] developing our full financial recovery plan must proceed quickly.

“But given the scale of the challenge, implementation of that plan is likely to be lengthy and there will need to be an extended period of rigorous spending control and tight financial constraints.”

A further report and revised Emergency Budget for 2023/24 will be presented at an Extraordinary Council Meeting in late October.