Birmingham City Council ‘bankruptcy’ three key questions asked by members

Probes into Birmingham City Council’s finances have begun following the announcement it is effectively bankrupt.

The news broke on Tuesday (September 5) that the council cannot balance its books with an £87 million deficit, £100m botched IT system, and estimated over £1 billion in equal pay claims to pay.

A committee of members met on Thursday (September 7) to grill HR and finance chiefs about what happened in the lead-up to issuing the Section 114 notice – a legal step which freezes all new spending. Here are some of the key findings:

What key services Birmingham City Council must provide?

Councillors are unsure what key services they need to provide – and what could be cut. The Section 114 order means the City Council can, for now, only deliver statutory services and those which protect the most vulnerable, leaving everyone curious as to what this includes and, crucially, what could be cut.

Coun and committee chair Jack Deakin (Lab, Allens Cross), stated that a list of such services, and possible assets to sell off to save money, had been requested in February and he asked for an update on its progress. But City Solicitor Janie Berry explained it was not as simple as providing a list for councillors to go through with a highlighter.

She said: “It is extraordinarily difficult to define council statutory functions. There are some very common-known statutory functions like food safety, child protection, adult social care, however, to get you a definitive list is extraordinarily difficult.

“Legislation is very widespread across local authority functions and there used to be, about 20 years ago, a list of over 1,000 statutory functions, but since then legislation has changed.”

She added that different councils have different priorities and this also affects what counts as a statutory provision. “Even just to go through all the legislation that we are involved in would take quite a significant time just to go through every single function so there isn’t an easy answer to that one I’m afraid,” she said.

When did council leader John Cotton find out about Section 114 being issued?

A key back-and-forth went over the sequence of events between Friday 1 and Monday 4, which led to the Section 114 being issued.

Councillor Alex Aitken (Lab, Kings Norton), describing the moment the news broke on Tuesday morning, while Ms Greenway and Councillor Cotton were away from the office, said it “descended into chaos”.

Facing questions, Ms Greenway, who was unwell during and after the weekend, confirmed she had been emailed the outcome of the external audit on Friday afternoon but hadn’t accessed that email so “that’s why it kicked in on Monday morning for discussions”.

Ms Greenway confirmed that she had followed official guidance to let chief executive Deborah Cadman know she was preparing to issue section 114 and that it is Ms Cadman’s responsibility to inform the council leader. Ms Greenway did not speak with Coun Cotton on Monday but believes an email was sent to him informing him of the plan.

Coun Meirion Jenkins (Cons, Sutton Mere Green) said: “So the leader’s on holiday in New York; I think he could be forgiven for not reading each and every email that he receives during that time. Now, something as significant as the bankruptcy of Europe’s largest metropolitan authority, surely someone would have thought to phone the leader and say: ‘have you seen this email that’s about to go out, mate?’”

Coun Paul Tilsley (Lib Dem, Sheldon) warned the committee to be careful not to “kill the messenger” but agreed the leader should have been called. Coun Deakin suggested that the finance director should also have held some responsibility for making sure Coun Cotton was informed.

Was the February 2023 budget illegal?

Senior councillors first knew of the scale of the claims in early February, it has been claimed HR director Darren Hockaday told members he had first made senior councillors aware there could be a £300-800m bill for equal pay claims in an email on February 3.

The issue was then discussed among senior members on February 6 but this was not relayed to the rest of the Labour group or other opposition parties, despite the budget for 2023-24 being set later that month. Coun Tilsley said the timing of that discovery meant the council had been told ‘lies’ over the budget setting.

He said: “The leader presented a budget to the city council in knowledge there was at least £300m claims against the city on equal pay. We have been told total lies and that is with a capital L, and I am appalled by this because it takes scrutiny to try and find out what actually happened. It is of paramount importance because it shows that the budget that we approved in February 2023 was an illegal budget.”

Asked by Coun Alex Aitken (Lab, Kings Norton) if the £300-800m estimation had been shared widely with senior people in Birmingham City Council before the budget, Mr Hockaday said: “What I am giving you is factual and correct.

“I don’t want to be a scapegoat for any of this, I have worked tirelessly on behalf of the council to fulfill my role and I just want to be clear about that because I care deeply about the financial position of the council and the sustainability of the organisation.”