The UK General Election - 4th July 2024

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Birmingham City Council Effectively Declare Bankruptcy – What does it mean for the future?

Elliot Hawkes

Account Manager

Today Birmingham City Council, the largest local authority in the country, effectively declared itself bankrupt after issuing a section 114 notice.

Previously made by other councils including Croydon, Thurrock, and Northamptonshire, the notice effectively means the local authority has judged itself to be in financial danger, no longer able to balance its budget which currently sits at a gap of £87m.

The announcement however comes as little surprise to many. A significant bill for equal pay claims and issues installing a new IT system resulting in costs beyond what was expected contributed to the council’s woes. Meanwhile, mismanagement at a leadership level was undoubtedly a factor that eventually culminated in the removal of former leader Cllr Ward earlier this year.

Though, it wasn’t all self-inflicted. Over the last decade Birmingham City Council has faced £1bn in government cuts, which has added to pressures in the UK’s second city. Meanwhile, nationwide inflation rates have stung many councils, not just Birmingham.

Either way, the impact of the announcement will undoubtably ripple through Birmingham. With all but essential spending to protect core services, it is likely that key council-led projects focused on growth could be stunted.

Following the Commonwealth Games there was a real drive to push the city to new heights over the coming decades. Indeed, the ambitious 2040 city plan was published just last month, with a vision for a brighter, better, future for Birmingham and its people.

It’s not to say that this potential is lost… for the council this announcement is a “necessary step as they seek to get the city back on a sound financial footing.” Under new leadership, with appropriate action, Birmingham may continue its upwards path.

It’s important to note that the city also remains highly investable, with a vast amount of potential still to be unlocked, and with countless exciting and promising projects accelerating ahead despite concerns at a council level.

Wider Impact?

While this announcement is locally centred, the issue will undoubtedly have fallout within the wider political landscape.

For many, criticism has been directed to the Labour Party in Birmingham, who have been highlighted for their poor leadership and management over several years.

In response Mayor of the West Midlands, Andy Street noted that the news raises “serious questions” regarding the decisions that have been taken, and that the “city of Birmingham deserves so much and truthfully, I am incredibly concerned that citizens – and the services they rely on – have been let down in this way.”

The news and reaction to Labour’s largest authority issuing this notice will do little to boost support for the party nationally. Indeed, it was such a concern that Labour HQ felt intervention was necessary earlier this summer.

Yet, others will point to the announcement as further evidence of the impact of over a decade of Conservative cuts. Local authorities play a vital role in driving the country and supporting local economies. Funding reductions can hamper these efforts, potentially affecting a region’s job creation, investment attraction, and overall economic growth. Many will want assurances that this issue won’t come forth in their home county, city, and town.

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