‘Radical’ changes and £200m of cuts essential for lawful council budget

Commissioners overseeing Birmingham City Council said that without “significant action…it will be extremely difficult to set a lawful budget for the forthcoming year”.

Led by Max Caller CBE, commissioners have been “struck” by the need for a “radical step-change” in the council’s financial management, which needs to make savings of £200m over the next two financial years.

In an update in anticipation of a Cabinet meeting on November 14, it was revealed that a targeted approach to the disposal of assets must begin this calendar year, in order to reduce the need for unsupported borrowing and revenue consequences of debt. Council assets include the Central Library, Birmingham Museum and Art Gallery, Aston Hall and Sarehole Mill, thought to be the inspiration for a mill in Tolkein’s Lord of the Rings. Its stake in Birmingham Airport could also be sold off.

Over the last four weeks, commissioners said they have begun to understand the scale of challenges but also a “range of other matters that are only now being surfaced”. Financial challenges include an £80m overspend on a malfunctioning IT system and a £760m equal pay liability. Trade unions and the council have recently reached an agreement over the crisis. 

There has also been “very limited progress” in developing a plan to plug the budget gap for the next few years and decisions are likely to be required by Ministers to set this.

£200m is needed to be saved over the next two financial years, meaning that £165m of savings must be made in the 2024/25 financial year and an additional £35m of savings in 2025/26.

This is thanks to an overspend of £87.4m that has been forecasted for 2023/24 and is projected to rise to £165m in 2024/25, £177m in 2025/26, £172m in 2026/27 and £180m in 2027/28.

Reasons cited for the overspend include Oracle costs, increased temporary accommodation costs, children and families pressure, increased adult social care demand pressure, a non-delivery of savings and impact from business rates and council tax collection.

Since these items continue to result in overspending and budget gaps in future years, commissioners said that there’s a structural deficit in the underlying budget for the council which has not been addressed in prior years. Therefore, the underlying budget needs to be re-based.

Commissioners do believe however “that with the right leadership, the budget can be brought into balance and although there will inevitably be some difficult decisions many services could deliver better outcomes for the citizens at lower cost”.

Cllr John Cotton, leader of Birmingham City Council, said: “We need to be absolutely transparent about the situation the council is in and this report confirms the figures we have already made public in terms of the budget shortfall we face after a decade of cuts and recent rampant inflation.

“The cabinet and leadership team are focussed on working with commissioners to meet these challenges and get the council on a road to improvement. We know it will not be easy and we will have to make very difficult decisions about where money is spent and invested – and what we can no longer afford to do.

“We will continue to be open about the position we are in, however difficult those conversations will be, and what it means for the city.”

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