Birmingham Council, the largest local authority in Europe, recently found itself in dire financial straits, leading to a takeover by government-appointed commissioners. In September 2023, the council issued a Section 114 notice declaring itself bankrupt after failing to pay a £760 million bill on equal pay claims. The commissioners took over the council, its decision-making processes, and financial decisions, instructing the local government to balance its budget for the next two years.
As part of their efforts to regain stability, Birmingham Council has revealed plans to sell £750 million worth of assets and increase council tax by 9.99 percent. The local authority’s plans also include cost reductions in adults social care and children’s care services. These drastic measures are seen as an important approach to restoring Birmingham City Council to a sound financial footing.
The council’s financial director, Fiona Greenway, has outlined measures that must be taken before the local authority can resume medium-term financial planning. At the heart of this savings program is a 9.99 percent increase in council tax, which has been labeled as unprecedented in scale. Birmingham residents, in 25 percent of the city’s 461,000 households, will also be eligible for support, with £1.02 million of additional Council Tax Support Scheme made available to them.
Council leader John Cotton has acknowledged the significant spending reductions and council tax increase, stating that there is no alternative but to address these challenges head-on. He attributed the council’s insolvency to a combination of austerity and underfunding, compounded by high inflation and rising demand for services, echoing similar challenges faced by local authorities across the UK.
While the government has recognized the budget challenges for councils in England and Wales, it also pointed to the failures of the Birmingham council leadership. Mistakes such as mismanagement of employee relations and the flawed implementation of costly software systems have played a role in eroding the council’s financial stability, according to government-appointed commissioners. If the commissioners approve the council’s two-year budget, it will result in a significant council tax increase for Birmingham residents. Although this increase exceeds the government’s threshold, the council has plans in place to provide support to those who may experience financial hardship as a result.
Birmingham is not the only council to face financial struggles in recent times. Other local authorities, such as Woking and Thurrock, found themselves in similar positions. According to reports from the County Councils Network (CCN), 128 out of 136 English local authorities plan to raise their council tax to the maximum allowed in April, ultimately reflecting the widespread financial challenges being faced by councils across England. Following the government’s announcement of a £600 million support package for local authorities, there is continued recognition of the need for financial assistance to help deliver vital services to communities.