Birmingham City Council will likely require “decisions from ministers” in addition to “significant action” by both members and officers to set a lawful budget for the forthcoming year.
The government-appointed commissioners at the council have been “struck” by the authority’s approach to financial management, which requires a “radical step-change”, according to a report providing an update on the financial position, which will be presented at a cabinet meeting next week (14 November).
A £164.8m budget gap must be addressed “with urgency” this financial year, which is “certainly going to increase” in the budget for 2024/25, according to all indications.
The forecast for 2025/26 shows an additional budget gap of £12.3m in-year, making this £177.1m cumulative across the three years – but this figure is also expected to rise.
The council’s medium-term position was described as “stark” in the update. “Commissioners have noted that there has been very limited progress in developing options to close the budget gap for 2024/25 and subsequent years,” it read.
“The council at pace must now identify viable savings options for both 2024/25 and 2025/26. All members of the corporate leadership team and cabinet must grip this challenge and evidence practical, tangible progress in the next month. In doing so it must move away from the current focus on annual budgets, ensure savings are robust and resources are available to deliver savings in line with the budget. The time available to do this is extremely limited.”
The commissioners are now requiring cash savings targets “that include some head room” to be issued to council departments for both 2024/25 and 2025/26 “with the instruction that departments must identify credible savings options”.
They also require a “clear” budget timetable to be set that includes “time for political consideration of savings and also due diligence by officers”.
Birmingham must also identify project management resource to “deliver what will inevitably be an extensive transformation programme that will last some years”, the commissioners have said.
The commissioners noted the need to “properly use data” as previous budgets “have been characterised by undeliverable savings and understated service growth and inflation”.
The authority is no longer in a position to embark on any significant prudential borrowing with a consequent impact on all capital programmes that are not 100% funded by external means, the commissioners have said.
The council must therefore review its existing capital programme and “prepare an asset strategy that reflects this position”.
The financial updated read: “In addition, an orderly, targeted approach to asset disposals must begin this calendar year to generate the capital receipts that will be required to reduce the need for unsupported borrowing and to reduce the revenue consequences of debt.
“Commissioners believe that with the right leadership the budget can be brought into balance and although there will inevitably be some difficult decisions many services could deliver better outcomes for the citizens at lower cost.”
The commissioners require that updates on the council’s financial position be reported to every cabinet meeting going forward, “until a stable and deliverable budget can be managed without support”.
Commenting on the financial update, John Cotton, leader of Birmingham City Council, said: “We need to be absolutely transparent about the situation the council is in and this report confirms the figures we have already made public in terms of the budget shortfall we face after a decade of cuts and recent rampant inflation.
“The cabinet and leadership team are focused on working with commissioners to meet these challenges and get the council on a road to improvement. We know it will not be easy and we will have to make very difficult decisions about where money is spent and invested – and what we can no longer afford to do.
“We will continue to be open about the position we are in, however difficult those conversations will be, and what it means for the city.”
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