Birmingham facing 'unprecedented' cash crisis

Elected councilors for the biggest local government authority in Europe have been told they face "an unprecedented financial challenge" as the City of Birmingham, in England's West Midlands region, tries to deal with a cash crisis that has pushed it to the verge of bankruptcy.

The council, which provides services for more than 1 million people in England's second-largest city by population, announced earlier in the summer it had serious financial problems as the result of a court case relating to pay discrimination for council workers between 2006 and 2012, which cost it hundreds of millions of pounds. The crisis was also caused by the wildly over-budget installation of a new computer system.

In July, the local authority announced it was halting all non-essential expenditure with immediate effect, and council members have now voted to approve four recommendations connected to the crisis – legally acknowledging the desperate situation, agreeing spending controls, accepting measures to address the crisis, and approving a further report and emergency budget in October.

The United Kingdom central government's Communities Secretary Michael Gove has already said that commissioners will be sent to take charge of the day-to-day decision-making at the local authority. The prospect of a rise in the council tax residents pay, job losses, and the selling of council assets all also look likely.

"Senior leaders, both elected members and officers, have come and gone, but the one constant (over the years) has been the failure to deliver for residents who deserve better," said Gove. "I believe strongly in local decision-making and the devolution of power to local communities. But I also believe that when failures in local government occur, we must act, as we devolve more power to local government overall, so we must demand sharper accountability and the need for action in Birmingham is pressing."

The council has been controlled by the Labour Party since 2012, but the hugely costly court case it recently lost relates to years when the council was under no overall control of any single political party.

A recovery plan report presented to council members at an extraordinary meeting earlier this week said "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 organization".

Council leader John Cotton said the choices ahead were not ones "anyone of us ever wanted to make" but he said he was committed to seeing the crisis through.

However, Conservative Party councilor Matt Bennett said all that had been agreed so far was "a plan to have a plan" and Cotton's response was "implausible".

Paul Tilsley, leader of the council's Liberal Democrat group, said it was "probably the worst crisis" in the local government's history.

"We have got the four horsemen of the apocalypse and I would identify them as the sale of assets, reduced staff, reduced services, and increased council tax to pay for it," he said.

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