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Levelling Up Secretary Michael Gove has accused Birmingham City Council of failing to deliver for residents as he announced the Government was sending in commissioners to help manage the local authority after it declared itself effectively bankrupt.
Mr Gove also announced he was launching an inquiry into “how Birmingham got to this position and options for how it can become a sustainable council moving forward”.
The commissioners will take control of all financial and strategic decision in the city and will advise the council on a improvement plan than Mr Gove said should be completed within six months.
Speaking in the House of Commons, Mr Gove said: “Birmingham City Council has not served the residents of that great city as it should have.
“For years now the city has suffered as the council has failed to grip underperformance. Poor leadership, weak governance, woeful mismanagement of employee relations and ineffective service delivery have harmed the city.”
Mr Gove added: “I am today writing to the council to set up my proposal to intervene and to appoint commissioners, and that I intend to launch a local inquiry into the causes.”
Mr Gove did not pledge central government cash to help plug the council’s funding gap.
Earlier this month Labour-led Birmingham filed a section 114 notice, which means it is effectively bankrupt and has halted all but essential spending.
Mr Gove has appointed experienced local government professional Max Caller as Commissioner in Birmingham.
The minister has given the council five days to comment on his proposals for the commission to take control of the council.
A former adviser to Birmingham City Council, Mr Caller has more than 50 years’ experience in local government and has been involved in the recovery of a number of failing councils, starting with the turnaround of Hackney Council in 2000.
He also led a series of high-profile best-value inspections at Northamptonshire County Council, Liverpool City Council and Slough Borough Council – and was called in to review Nottingham City Council in 2020 following the collapse of Robin Hood Energy.
The announcement from Mr Gove came after council chiefs warned Birmingham residents to prepare for an emergency budget and recovery plan that will “involve hard choices” and “will result in a smaller organisation” with job losses inevitable.
Angela Rayner, shadow Levelling Up Secretary and Labour’s deputy leader, criticised the Government for reducing local authority funding.
Responding to Mr Gove, she said: “Like the rest of the country Birmingham is facing the shock of spiralling inflation and battling a cost of living crisis.
“In the face of all this, the Government stripped away Birmingham’s reserves. He surely cannot deny that Birmingham has experienced some of the most severe cuts of the last 13 years.
“Local authorities across the country are struggling, and after 13 years, he can’t seriously say that it’s all it’s all their own fault.”
Ms Rayner added that before 2010 only one council had gone bust, but since the Conservatives entered Government eight councils had issued Section 114 notices.
Councillor John Cotton, Birmingham City Council leader said he would work with the Government and the commissioners “to get the council back on a sound financial footing”.
He added: “On becoming Leader, I was concerned that there was a lack of senior capacity at the council to deal with the issues that we face, which is why we asked Secretary of State Michael Gove and the Local Government Association to help us rebuild that capacity and support us to get the budget on track. Today’s announcement is an important step in that direction.”
Cllr Cotton went on to suggest central government funding cuts had contributed to Birmingham’s financial situation.
He said: “Although this is a challenging time, and comes after a decade of cuts totalling £1bn, we will make the tough decisions needed to transform the council, restore financial sustainability, and deliver the services that the people of Birmingham deserve.
“A report outlining elements of our initial response will be considered and discussed by full council on Monday 25 September and we will continue to be on the side of our residents as we build a better Birmingham.”
Provisional plans outlined by chief executive Deborah Cadman will include the potential sale of some of the council’s £2.4bn property portfolio, which could include prized assets such as museums, art galleries and the City’s library.
The council is facing the prospect of a £760m bill to settle equal pay claims. The council was also hit by the failed implementation for a new IT system, which cost around £100m to fix.
The city also has an existing lending amounting to £3.3bn, which is slated to cost £239m in repayments in the current year.
On top the equal pay claims, the failed IT system and existing debt payments, the largest local authority in the country has also been hit by a growing demand for services such as adult social care, and repairs to an ageing housing portfolio.
Birmingham may not be the last council to face bankruptcy. As i revealed last week there are councils across the country are cutting tens of millions of pounds from public services in order to avoid issuing their own Section 114 notices.