'Bankrupt' Birmingham City Council sets out plan to attempt to balance the books

Last year we reported that Birmingham City Council, the largest local authority in Europe, had issued a Section 114 Notice pursuant to the Local Government Finance Act 1988, indicating that it was in severe financial distress and could no longer balance its budget. The council has long-standing financial issues which have been compounded by an £867m equal pay claim and an overspend on IT and finance system Oracle which is set to reach around £136 million.

In a recent briefing, Birmingham City Council set out its plan to cut £150 million from its budget in 2024-2025 and the same in 2025-2026. The planned measures include: 

• Cutting up to 600 council jobs in a variety of sectors;
• Dimming streetlights, reducing highway maintenance and rubbish collection frequency; 
• Significant reductions to both adult social care and family support team budgets; 
• A 100% cut to arts funding in the city including a withdrawal of all funding for organisations such as the Birmingham Royal Ballet and City of Birmingham Symphony Orchestra; and
• Raising council tax for residents by 21% over the next 2 years. 

In addition, the Financial Times recently reported that Birmingham City Council is also preparing to sell off around £750 million of assets including land and buildings over the coming two years to attempt to generate income. 

These broad and wide ranging measures will undoubtedly be felt by the residents of Birmingham in the coming years but it seems that many other local council areas may be facing similar cuts. Reportedly almost one in five council leaders in England now say they are likely to declare bankruptcy in the next 15 months. 

The Guardian newspaper recently commented that only reform of central government funding for local councils can resolve the deepening crisis. It remains to be seen whether growing pressure over this issue will result in it being addressed in the Chancellor's upcoming Budget on 6 March 2024.