Birmingham City Council effectively bankrupt

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Birmingham City Council effectively bankrupt

Birmingham City Council has issued a Section 114 notice, effectively declaring the local authority bankrupt.

In a statement, Cllr John Cotton, leader of the Labour-ran council and deputy leader Cllr Sharon Thompson said the notice was a “necessary step as we seek to get our city back on a sound financial footing”.

Now, no new expenditure is allowed for the largest authority in Europe, and only statutory services including safeguarding people will be permitted. Existing contracts and plans will however be honoured.

The council has faced mounting financial pressure, first after overspending by £80m on malfunctioning IT system Oracle, and it was then hit by a £760m equal pay liability and unofficially halted all non-essential spending. A total of £1.1bn had already been paid over the last decade in relation to the settlement of Equal Pay claims.

Today, the council said its equal pay bill is growing between £5m and £14m every month.

Prime Minister Rishi Sunak ruled out a bailout at the end of July, saying it was “not the government’s job to bail out the council for its financial mismanagement”.

All staff were asked to consider resigning, as part of the struggling council’s plans to make savings on August 21.

Information on The Mutually Agreed Resignation Scheme (MARS) was sent to all 10,000 staff, with GMB Union claiming the council were ‘side stepping stolen wages’ as staff opting for the scheme could be required to sign away equal pay claims against the authority.

Michelle McCrossen, organiser at GMB union, Birmingham City Council’s largest staff union said: “Today’s announcement is a humiliating admission of failure on the part of Birmingham City Council’s officials and leadership.

“Not only are they responsible for creating this crisis through years of discriminating against their own staff, but even they no longer believe themselves capable of fixing it. For decades the Council has stolen wages from its low-paid women workers, running up a huge equal pay liability that has brought Birmingham to the brink.

“Due to the reckless incompetence of council bosses, thousands of city employees will be worrying for the future of their jobs and of the essential services that they provide for the people of Birmingham.

“GMB will continue to fight for pay justice for our members, and to ensure those responsible for this crisis are held to account.”

Section 114 notices have been issued in recent years by Slough, Thurrock, Croydon and Northamptonshire.

Source: (may require sign up) https://www.thebusinessdesk.com/westmidlands/news/2077403-birmingham-city-council-effectively-bankrupt

[dutchman]

"Go woke = Go broke!"

I fully expect Coventry City Council to follow suit shortly.

[dutchman]

Birmingham Commonwealth Games was a mistake - ex-advisor



A former advisor to Birmingham City Council has said the hosting of the Commonwealth Games was a mistake given its legacy of financial problems.

Max Caller said last summer's event had been a "challenge too far" for a council beset with difficulties.

The authority is to stop all but essential spending amid an outstanding £760m bill to settle equal pay claims.

Urgent talks are taking place following Tuesday's announcement that the Labour-run council was effectively bankrupt.

The local authority has an £87m hole in its budget this year and might have to spend up to £100m to fix a botched IT system.

Mr Caller is a former non-executive director of the council and was appointed in 2019 to try and help it deal with historical financial problems.

He told the Today programme the Commonwealth Games, which was awarded to the city in December 2017, had diverted the authority's focus away from finding solutions.

"The problem with councils that are in trouble is they just need to focus on getting better, rather than trying to do nice new things," he said.

"There is a limit to the amount of political and managerial capacity and if you're spending time doing Commonwealth Games you cannot cope with the serious problems that you already face.

"The advice that I gave, and that others gave, to officers and members at the time was that this was likely to be a challenge too far."

"If it were me, I wouldn't have done it."

He said while the games had been an "amazing event", it had moved effort away from addressing "the underlying problems that had been around since before 2015" and the council's focus should have been on "doing the basics".

He added: "You can't do nice things if you haven't done the boring really well."

[rebbonk]

Well, cover me in cow-pats and call me smelly!

[dutchman]

‘Bankrupt’ Birmingham council spent £9.8m on bike lane ‘no one uses’



Birmingham’s “bankrupt” council has been accused of wasting almost £10 million on a cycle highway that is wider than a bus lane.

The multi-million pound cycle lane was opened in 2019, but motorists say it has been barely used and is a prime example of the authority’s financial incompetence.

On Sept 5, the Labour-run council issued a section 114 notice, meaning it cannot meet its financial liabilities amid an outstanding £760 million of equal pay claims.

The council, which is Europe’s largest local authority, confirmed all but essential new spending must stop immediately.

Locals have since highlighted a number of examples of shocking wastes of money that have contributed to the town hall bosses’ perilous position.

They include a 2.5 mile “cycle highway” along the A34 – one of the busiest commuter routes into the city – which has been barely used by cyclists since opening four years ago.

Road users say the lane, between the city centre and Perry Barr, causes complete gridlock at rush hour and forces the bus lane farther into the road.

It means parts of the road have been left with just one lane for cars, while in other sections the cycle lane slices into the pavement.

Photographs taken on Wednesday show bumper-to-bumper gridlock with the bike lane sitting empty and one cyclist even ignoring it to ride down the main road instead.

Residents say the £9.85 million route only brought commuter chaos in an already over-congested city and cyclists continue to ride along the pavement or road. Birmingham City Council also forked out £16 million moving a National Express bus depot just 300 metres in time for the 2022 Commonwealth Games.

The original facility was to make way for an athletes’ village – which never even materialised and was turned instead into affordable housing.

The cost was even highlighted at the time in the House of Commons by Conservative MP Gary Sambrook, who represents Birmingham Northfield.

He said in January 2021: “In Birmingham, the city council originally budgeted £2 million to move a bus depot.

“That escalated to £16 million, which local people are going to have to pay, all to achieve a move down the road of only 300 metres.

“Is that not just a perfect example of Labour incompetence in local government?”

It also emerged that the council ignored advice not to host the Commonwealth Games despite serious financial difficulties.

Birmingham resident Emily Hill, 45, a mum-of-three and sales adviser, said: “I live in Perry Barr where in the last few years there has been some shocking wastes of cash.

“It is no surprise the council find themselves in this position having splashed £10 million on a cycle lane nobody uses and £16 million on moving a bus depot.

“The cycle lane is only a couple of miles long and reduces traffic to a single lane, causing absolute gridlock. It was a ridiculous decision.

“Cyclists use the main road or pavement anyway, it has made no difference at all. If anything it has made traffic worse.”

Dad-of-one Paul Turner, 36, an electrician from Kingstanding, Birmingham, added: “The people of this city have seen this coming for a while so it’s no surprise really.

“Their financial difficulties have been well publicised for a long time yet we went ahead and hosted the games even when they were warned not to.

“That cycle lane is a prime example of how out-of-touch these people are with reality and £16 million moving a bus depot that didn’t need moving is just farcical.

“It’s no wonder they got into such a mess and it’s the people of this city who will now probably suffer as a result of their financial incompetence.”

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'New York trip' by leader of 'bankrupt' Birmingham sparks backlash

The leader of "bankrupt" Birmingham City Council has been criticised for being abroad during the city's crisis.

The authority announced on Tuesday morning it had filed a section 114 notice, meaning that new spending on all but essential services must cease.

A crisis management expert said such conditions required John Cotton to be "front and centre" in Birmingham and not on a reported holiday overseas.

Mr Cotton has been contacted for comment.

According to a report in the Daily Mail, Mr Cotton's daughter said the council leader was in New York to celebrate his birthday, a trip that had been arranged two years ago.

On Tuesday, Mr Cotton confirmed to the BBC he was not in the city due to a "longstanding family commitment" but did not share details, adding that he was working "round the clock" on the situation.

"I can assure everybody that this is my absolute top priority and this is what I will continue to focus on together with my deputy leader and my cabinet," he said at the time.

It is so far unclear when Mr Cotton departed and when during that timeline he learned of the Section 114 notice. It is also unclear when he plans to return.

The issuing of a section 114 notice means the authority has announced it is effectively bankrupt and can no longer balance its books.

The authority has been struggling with a bill of up to £760m to settle equal pay claims.

There is an £87m hole in the authority's budget for this year and it may have to spend up to £100m to fix a botched IT system.

Jonathan Hemus, from Insignia Crisis Management, told BBC Radio WM: "I know it was the guy's 50 birthday and I know that is important but when you are in the middle of a crisis and actually know when a crisis is going to break, the leader needs to be front and centre, leading from the front."

He said "visible leadership [was] critical in any crisis", adding "now is the time for him and others to step forward, show courage, demonstrate the values they believe in and do everything they can to make the situation better".

Source: https://www.bbc.co.uk/news/uk-england-birmingham-66750540

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How convenient!

'Bankrupt' Birmingham council's IT system cannot show accounts



Problems with "bankrupt" Birmingham City Council's IT system are so acute staff are unable to produce accounts detailing its financial status.

Council chiefs were told on Friday a financial statement for 2022/23, showing all money coming in and out of the authority, could not be signed off by external auditors as a result.

The council filed a section 114 notice which means it is essentially bankrupt and has halted new spending.

Work to fix the IT issues was ongoing.

A report by the auditors said financial statements for 2020/21 and 2021/22 had also not been signed off due to being "materially misstated" because of the size of equal pay claims facing the council.

The authority needs to settle a £760m bill for the claims, having already paid out more than £1bn in compensation to underpaid, mainly female workers who missed out on bonuses given to staff in traditionally male-dominated roles.

Issues with the IT system and the huge equal pay bill mean the council faces an immediate budget shortfall of £87m this year.

It has blamed the implementation of its Oracle IT system for its desperate situation. Initially expected to cost £19m, a three-year delay and complications with its implementation mean the cost is now expected to reach £100m.

External auditor Mark Stocks said: "As we sit here today, the council's not able to give an outturn position for 22/23, neither is it able to produce a set of accounts for 22/23.

"I know officers are working hard on both of those but there is no clear timescale for when exactly when that will be completed.

"All of that arises from the Oracle implementation, which we all know didn't work."

He said there had been a "significant level of adaptation" to the system which did not work and caused "a number of difficulties in financial reporting".

Issues included the council being unable to record and allocate cash payments to the right accounts, and instead having to do this manually, he said.

During discussions of a separate report on the Oracle system, chief executive Deborah Cadman said three teams had been set up to deal initially with the issues, with staff now focussed on what it "needs to look like and how we achieve that".

She added she was "really pleased to say we are making good progress" in fixing issues, but a few "serious problems" remained that needed to be resolved.

She praised the "phenomenal" efforts of staff in working on "trying to rectify the challenges we saw".

Chair of the committee, Councillor Fred Grindrod, asked if there was an expectation of when the IT system might be "stable" and fully functional.

Ms Cadman said she was "absolutely determined to deliver" it as quickly as possible, and would provide a date in future.

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Commissioners to run Birmingham city council, Michael Gove says



Ministers have announced commissioners will run Birmingham city council as part of a series of drastic emergency measures for the country’s largest authority, which has in effect declared itself bankrupt.

On 5 September the council issued a section 114 notice stating it did not have the resources to balance its budget because of a series of problems including a spiralling equal pay bill and IT failures.

In a statement to the House of Commons on Tuesday, the housing secretary, Michael Gove, announced he would be appointing commissioners to intervene in the daily running of the council, as well as launching a local inquiry.

“I do not take these decisions lightly but it’s imperative in order to protect the interests of the residents and taxpayers of Birmingham,” he said, saying the council had “not served the citizens of the city as it should have”.

“Poor leadership, weak governance, woeful mismanagement of employee elations and ineffective service delivery have harmed the city. The one constant is there has been a failure to deliver for residents who deserve better.”

The council, which serves more than 1 million people, has a budget shortfall of £87m for the current financial year, projected to rise to £165m in 2024-25.

Gove said the commissioners, led by the local government expert Max Caller, would “exercise all functions” related to the council’s governance, financial decision-making and senior appointments.

Initial details of a financial recovery plan for the city, published on Tuesday, suggested the selling of council-owned assets, job cuts, a request for government support and a rise in council tax could all be needed to address the council’s financial woes.

“Our 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,” a report from the council’s chief executive, Deborah Cadman, stated.

The plan is due to be discussed at an extraordinary council meeting on 25 September.

Gove said a local inquiry into the council would address “more fundamental questions around how Birmingham got to this position”. He also suggested one of the reasons why the government had decided to intervene was linked to the 2014 Kerslake report, commissioned after the Trojan Horse affair, which alleged extremism in Birmingham schools.

He said that report warned “successive administrations had failed the city … that the council lacked a clear vision, had failed to tackle deep-rooted problems such as the low level of skills and had a culture of sweeping problems under the carpet”.

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What a hypocritical shower...

Bankrupt Birmingham Council wasted £2.1M on vehicles that don't comply with its own clean air zone - despite more than 110,000 drivers being fined thousands by draconian green scheme

Labour-run Birmingham Council spent a staggering £2.1million on hiring vehicles which did not comply with its own clean air zone just before being declared bankrupt.

This comes despite more than 110,000 drivers being fined thousands of pounds by the draconian green scheme.

The cash-strapped council is one of several in the country, and the first outside London, to introduce a scheme which charges drivers if their vehicles did not meet certain emissions standards.

It was introduced in June 2021 to help tackle traffic pollution and brought in £79 million since then.

But now the authority - the biggest in the country - faces making massive cuts which experts have warned will take years to rectify. It was effectively plunged into bankruptcy

A Freedom of Information Request by MailOnline today exposes the 'stupid' expenditure of spending £1.7million in two years hiring vehicles which did not meet the air zone standards.

Figures show that the authority owns 146 vehicles which do not meet the requirements for its clean air zone.

In total, £4,054,699.94 was spent in 2022 and £3,524,473.32 so far in 2023 hiring vehicles which do comply with the charge. This in total is £7,579,173.26.

Figures show more than £2.1million was spent on hiring vehicles that do not comply with the clean air rules.

Conor Holohan, media campaign manager of the TaxPayers' Alliance, said: 'As Birmingham residents prepare for huge cuts to services and council tax rises, news of this waste will only compound their misery.'

The council raked in close to £90million from its controversial Clean Air Zone - only to pump more than £50million back into hydrogen buses and cycle lanes.

But it was revealed in March this year nearly 70,000 clean air fines were written off by Birmingham City council.

Nearly 50,000 Clean Air Zone (CAZ) fines have been successfully challenged by drivers since the launch of Birmingham's controversial scheme which will net the council a whopping £50million profit by the end of this year.

The city council has backed down and overturned a huge 48,256 penalty charge notices after motorists refused to pay because they believed them to be unfair - the council have given up on chasing around another 20,000.

A financial report published last month laid bare the scale of the problems facing the council.

It showed the council has an expected budget shortfall of £164.8million in 2024/25 - rising to £177.1million in 2025/26.

The council must make £165 million of savings in the next financial year.

One major challenge has been implementing a new IT system, the first big IT upgrade since 1999.

It is costing them a tens of millions and according to inspectors means the council will not have coherent accounts for two years. They currently do not know who has paid their council tax and business rates entirely.

This also comes after questions were raised a more than £100million black hole in the council's school taxi budget after MailOnline revealed that all the contracts were exactly the same value on public records.

Council records showed the values for all 163 four-year school transport contracts were exactly £64,938.27, around £10.5million in total (plus £1.5m for recently published contracts), around ten times less than the £128million the council paid out from 2020 to July this year, according to MailOnline analysis of invoices data.

Birmingham City Council also said earlier this year that it lacks sufficient resources to pay a £760million bill related to an equality claim, which is currently accruing at a rate of £5million to £14million a month.

Councilors from the local authority blamed the situation on 'huge increases in adult social care demand... dramatic reductions in business rates' and 'rampant inflation.'

A spokesperson for Birmingham City Council said: 'Vehicles owned or leased by the council often need to be replaced or upgraded due to operational needs.

'When the time arises to add to our fleet, we always seek where possible to ensure that new additions are compliant with city's Clean Air Zone.'

Source: https://www.dailymail.co.uk/news/article-12779101/Bankrupt-Birmingham-Council-wasted-2-1M-vehicles-dont-comply-clean-air-zone-despite-110-000-drivers-fined-thousands-draconian-green-scheme.html

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Birmingham outlines £150m of cuts
Birmingham outlines £150m of cuts image

Birmingham City Council has outlined nearly £150m of proposed savings as it tries to plug a £300m budget gap.

The council’s children and families department could see the biggest reduction to their budget with £57m of savings proposed.

City operations could see a cut of £29m, while adult social care could see their budget reduced by nearly £22m.

Council management is facing a nearly 50% budget decrease of around £15.6m.

The local authority was forced to declare itself effectively bankrupt in September and is facing a £87.4m overspend for 2023/24 and a budget gap of around £300m by 2025/26.

Cllr John Cotton, leader of Birmingham City Council, said: ‘The council is in an unprecedented situation as we need to find in excess of £250m savings over the next two years. As well as having to reset our finances we have to fundamentally change how we deliver services.

‘No detailed decisions have been made at this stage and there will be a consultation period so we can hear the views of residents and businesses. However, we have been clear that we will have to make very difficult decisions given the financial challenge we face - to do otherwise is not an option.’

Source: https://www.localgov.co.uk/Birmingham-outlines-150m-of-cuts/58524