The four major risks facing Birmingham City Council as it heads into a new year
Four major risks still face crisis-hit Birmingham City Council despite the authority taking ‘positive’ steps in its recovery journey.
The Labour-run council declared itself effectively bankrupt in September 2023 amid a financial black hole, triggering an unprecedented wave of cuts to local services and council tax hikes.
An array of failings contributed to the financial turmoil at the authority, including the equal pay debacle, inadequate budget setting, poor service management, demand led pressures and the disastrous implementation of a new IT system.
The ongoing blame game has also seen Labour politicians point the finger at funding cuts during the previous Conservative government.
Looking ahead, the city council continues to try and turn its fortunes around by making progress on its recovery journey and ongoing plans to transform the organisation.
A recent report by government-appointed commissioners, sent in to oversee the council’s recovery, acknowledged there had been “enhanced resilience and improved performance in some areas”.
But the report, set to be discussed at a council meeting next week, went on to warn that significant challenges remained, including four high-profile risks.
These were:
The ongoing bins strike: The report said the industrial action has had a “destabilising effect on corporate capacity, delaying progress in transformation and in making improvements in finance”.
Equal Pay: The commissioners noted there has been progress, with a framework agreement having recently been signed by the council and trade unions. However, they added that the financial liability remains a “significant risk”.
Finance: While budget planning has improved according to the report, the council remains “financially fragile”. Commissioners wrote: “The asset sales programme is progressing, but the scale of the challenge is immense, and transformational savings are still lacking.”
Oracle: The commissioners said implementation has made good progress and remains on track to meet the planned timelines. They said: “It is essential that this momentum is maintained. There remain significant risks in meeting the date and ensuring implementation is fully successful.”
The commissioners went on to say that the council’s long-term future will depend on tackling more persistent challenges within the authority.
These include embedding culture change; addressing governance reform and making sure the council is functioning as a “coherent corporate entity”.
‘We have turned a corner’
But it wasn’t all doom and gloom for Birmingham City Council.
The commissioners said in their report that the council had recently demonstrated “resilience”, pointing to progress in areas such as housing and children’s services.
They also praised the framework agreement on equal pay being reached and a corporate plan being produced for the 2025-28.
“We are pleased to record that progress is being made […] as a result of the determination and resilience being demonstrated by the political leadership and the sense of purpose being embedded in the organisation by the managing director and the management team that she has assembled,” the report said.
“We are also transitioning the approach to the intervention towards a balanced partnership.”
The commissioners said this could mean the council takes a “stronger leadership role” in driving its own recovery.
Responding to the publication of the report, council leader John Cotton argued that the organisation had “turned a corner”.
“We are not complacent and recognise there is still much to do before we become a well-run council that delivers good services for the people of the city,” he said.
“We are taking ownership of the next phase of improvement, building a foundation for greater self-reliance and resilience.”
The council said in early December that it was now close to balancing its revenue budget without the need for Exceptional Financial Support.
It said the 2026-27 budget gap has reduced from £83 million to £1.7 million and from £127 million to £10 million for 2027-28.
But the Labour-run council acknowledges there are still risks to manage and savings to deliver.
Coun Cotton added that that the local authority was working constructively with the Labour government led by Sir Keir Starmer.
Later that month, he praised the government’s multi year settlement announced on December 17, arguing that it would provide a huge cash boost for Birmingham Council over the next three years and help fund local services.
Government’s response
Responding to the most recent report, government minister Alison McGovern said she was encouraged by the progress and “important achievements” being made.
But she also heeded the commissioners’ warnings, writing: “The final equal pay liability remains a substantial risk which could have a major impact on the overall financial position of the council.”
“The various milestones on the horizon for 2026, including Oracle reimplementation and equal pay resolution, set against the backdrop of May elections, require the council to maintain absolute focus on delivery while sustaining the momentum of improvement and recovery,” the minister of state for local government and homelessness continued.
“Embedding a strong culture, sound governance, and a central transformation vision and plan is essential.”
Looking ahead to when government intervention could end, lead commissioner Tony McArdle OBE said an exit plan was being worked on.
“[This] will give absolute clarity to the council on the actions that must be completed and the operating behaviours and culture that must be in place and embedded by October 2028 [when statutory directions expire],” he said.
The commissioners’ report is set to be discussed by a finance scrutiny committee on Tuesday, January 6.
