BBC News 6 September 2023
Urgent talks are taking place at Birmingham City Council as the government, union chiefs and residents demand to know the fallout of it declaring itself effectively bankrupt.
The authority is to stop all but essential spending amid an outstanding £760m bill to settle equal pay claims.
The government said it had "expressed serious concern" about the authority's leadership.
The largest local authority in Europe has an £87m hole in its budget this year and in June revealed it might have to spend up to £100m to fix a botched IT system.
An advisor brought in to help the council in 2019 said hosting last year's Commonwealth Games in 2022 was also a factor.
Max Caller, a former non-executive director for the authority, told the Today programme: "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."
He said while it had been an "amazing event", it had diverted 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."
As news of the desperate situation unfolded on Tuesday, taxpayers demanded to know which services could be at risk, with fears over road maintenance, libraries and cultural projects.
Many are also questioning the viability of large-scale events such as the annual German Christmas Market. The council's funding of the 2026 European Athletics Championships at the city's Alexander Stadium is also unclear.
Mr Cotton told the BBC "tough decisions" would need to be made but statutory services like social care, waste collections and protecting the vulnerable would continue.
Thurrock Council in Essex declared itself bankrupt in December and the leader of its Labour opposition, John Kent, warned people in Birmingham they were likely to see noticeable changes in the city - and quickly.
"We've seen dirtier streets, grass being cut less frequently, our only theatre is now under threat and every subsidised bus route in the borough was just cancelled," he told BBC WM.
He also said council tax in Thurrock rose by 10% last year and was likely to increase by the same again this year.
"That's the situation we will be in for many years to come. People are rightly very, very angry."
On Tuesday evening, the government revealed it had been "engaging regularly" with the Labour-run council in recent months "over the pressures it faces, including around its equal pay liability, and have expressed serious concern over its governance arrangements".
"We have requested written assurances from the leader of the council that any decision regarding the council's issues over equal pay represents the best value for taxpayers' money," a spokesperson for Levelling Up, Housing and Communities said.
More than 10,000 council employees were asked last month if they wanted to leave as the authority launched a voluntary severance scheme to help tackle the equal pay claim, which is rising by between £5m to £14m a month.
Unite, which represents hundreds of workers at the council, said it was seeking urgent meetings with leaders to try to avoid workers "paying the price for the council's or central government's incompetence and financial mismanagement".
GMB, the biggest union among council staff, said the announcement was a "humiliating admission of failure" on the part of the council's leadership.
The council has declared a Section 114 notice which means a local authority has judged itself to be in financial distress and can no longer balance its budget.
Mr Cotton and deputy leader Sharon Thompson, said the move was a "necessary step as we seek to get our city back on a sound financial footing".
Mr Cotton told BBC Radio WM the council would "continue to deliver on essential services like children's safeguarding and social care, social care for adults, education, waste collection, road maintenance and library services" for the city's 1.1 million taxpayers.
But questions remain about where any cuts may bite, especially as the city was promised a so-called "golden decade" following the Commonwealth Games.
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Conservative councillor Ewan Mackey said the "golden decade" had proved to be "fool's gold" and called for the council to bring in "some proper financial management" and to be transparent about the difficulties it was facing.
West Midlands Mayor Andy Street described the news as "deeply disturbing" but insisted the city was not failing.
"The city of Birmingham deserves so much better, and truthfully I am incredibly concerned that citizens - and the services they rely on - have been let down in this way," he said.
Minister for Local Government Lee Rowley said the department had been aware of significant problems at the council for some time and the Section 114 notice was "not unexpected".
Dr Steven McCabe from Birmingham City University warned that the future of the council as a whole could be at stake.
The associate professor and political economist said the local authority had thrown itself "at the mercy of central government" despite the prime minister previously ruling out a bailout.
"Even if the government does intervene, it's likely to be with severe conditions, such as the possible break-up of Birmingham City Council, which would be a bitter pill to swallow," he said.
