Birmingham eyeing "unprecedented" level of savings over next two years

Birmingham City Council has detailed plans to make more than £370m in savings as part of extensive efforts to balance its budgets over the next two financial years.

A report authored by Fiona Greenway, Birmingham's Director of Finance & Section 151 Officer, also shows that the financially-beleaguered council has received Exceptional Financial Support (EFS) of £1.255bn from the Department for Levelling Up, Housing and Communities (DLUHC).

The report said the EFS loan is key to delivering a financial plan, which includes identifying and delivering a savings programme "unprecedented in scale". The plan would see £149m in savings for the 2024/25 financial year and a further £226m in savings for 2025/26.

Birmingham issued two section 114 notices last year amid overwhelming financial liabilities resulting principally from equal pay claims that totalled about £760m and the ballooning costs of implementing a finance and HR system.

Greenway's report says there is still "significant work (and cost)" required to stabilise and improve the operation of the Oracle system.

There is also work still to be done on implementing a new system of job evaluation to ensure the council's pay and grading structure can mitigate against any future potential Equal Pay claims.

The report also includes a request to DLUHC to increase council tax above the referendum limit at 9.99% for 2024/25 and 2025/26.

The budget proposals will go to cabinet on 27 February before being voted on at a full council meeting on 5 March.

In a review of the report, the commissioners sent in by the Government said the budget was deliverable, but added that it would require "major improvements in the arrangements for the delivery of savings".

"This includes governance, monitoring and project management arrangements and also a change in organisational culture where successful delivery of change and savings is valued and problems overcome rather than hidden," the commissioners said.

They added that the council had made "limited progress" in recruiting people with the right skills and knowledge to undertake some of the improvement work.

Commenting on the EFS loan, the commissioners said: "For the avoidance of doubt EFS is really nothing more than a loan from government that must be paid back through asset sales. There are conditions for this loan that mirror the concerns raised above around savings delivery."

They also warned that the council must begin on its 2025/26 budget immediately by identifying and starting to implement savings.

"The Commissioners believe a far higher proportion of savings in this second year can be generated through efficiencies,” the review said.

However, it added that savings will require a "far more considered approach to identification of savings and major changes to how the Council operates".

Cllr John Cotton, Leader of Birmingham City Council, said: "Birmingham City Council is facing a number of financial challenges and I want to apologise unreservedly for both the significant spending reductions and this year's substantial council tax increase. We have no alternative than to face these challenges head on. And we will do whatever is necessary to put the council back on a sound financial footing.

"Our situation has been made much worse by a national crisis in local government finance. A combination of austerity and underfunding - Birmingham has lost over £1 billion in funding since 2011 - added to a rising demand for services and inflation mean that, across the country local authorities are facing some of the biggest budget challenges in living memory."

Adam Carey