Bristol Mayor blames government as Birmingham City Council declares effective bankruptcy
Marvin Rees says the news is evidence of the "incredible financial pressure" local authorities are under
The Mayor of Bristol has blamed the Government after Birmingham City Council effectively declared bankruptcy.
Marvin Rees said the cash-strapped organisation running Britain’s second city was evidence of the “incredible financial pressure” local authorities had been under because of Whitehall austerity which had “hollowed out” councils.
The mayor said it was an issue not just for Midlanders but for the country as a whole because cities were “holding the UK afloat”.
Labour-run Birmingham City Council issued a section 114 notice this week declaring it in financial distress as it needs to settle a £760 million bill for equal pay claims.
It must stop all new spending immediately, except for vital and statutory services such as protecting vulnerable people.
The notice said the authority also faced an in-year financial budget gap of £87 million.
Labour mayor Mr Rees told Bristol City Council cabinet on Tuesday, September 5: “What this means is the largest local authority in Europe issuing a notice that tells government that it’s unable to balance its budget.
“It’s important that we step in here.
“Birmingham has been an incredibly important partner for us in Core Cities UK, they’ve been a very active city on the international stage as well, maintaining an office in Brussels throughout Brexit which is what we did as well, which was not just for the good of Birmingham, it’s for the good of the UK because while the national government is distancing itself from our European relationships, at a city level we’ve maintained those relationships.
“Let me say that as chair of Core Cities and leader of a UK core city, this is evidence of the incredible financial pressure that local government in general and cities in particular have been under for nearly 15 years now.
“What we need to recognise is that what’s happened in Birmingham will not just be an issue for the people of Birmingham and their wider city region, it will be an issue for the country because at the moment on many levels it’s the cities who are holding the UK afloat as the economic hubs, the cultural points of connection.
“That’s not to say areas that are not cities are not important, but the work we’ve been doing over the last few years has been stressing how critical cities are to driving our national economy, our global connectivity and our global reputation, and we need to recognise that.
“The austerity we faced since 2010 has hollowed out local governments across this country, and while we have also driven resource to the frontline to try to protect those frontline services, the point we’ve also made very often in this chamber is that the invisible cost has been the backroom capacity – the lawyers, the accountants, the planners that no one campaigns for but who make sure we get homes delivered, that we get good deals, that we get on top of funding rounds that come around and write the strategies that underpin the way we deliver our services.
“So really it’s a message of solidarity to the leadership in Birmingham, and that will come from all Core Cities because we see the pressure that we have all been under, the financial pressure that leads us into impossible situations.”
His comments were echoed by Local Government Information Unit (LGIU) chief executive Jonathan Carr-West who said: “To see the largest local authority in the country effectively declare bankruptcy is a sobering moment.
“Questions will no doubt be asked about decision making and governance in Birmingham.
“But questions should also be asked about an inconsistent, fragmented and short-term funding system that is driving dozens of councils across the country to financial ruin.
“LGIU has been supporting councils for 40 years, but our members tell us that they are experiencing the most acute crisis they can remember.
“Not only has the amount of funding been slashed by government but councils have been made to rely on short-term, piecemeal funding that inhibits effective financial management.
“Central government has kept councils living from hand to mouth and from year to year for far too long.
“Birmingham is the biggest council to fail so far, but unless something changes, it won’t be the last.”
Prime Minister Rishi Sunak’s official spokesman told the Press Association: “Clearly local government is vital to our communities and we know they have been facing pressures.
“The Government for its part has stepped in to provide support, an additional £5.1billion to councils in 2023/24, which is more than a nine per cent increase for Birmingham City Council.
“Clearly it’s for locally elected councils to manage their own budgets, I know the department has been engaging regularly with them to that end and has expressed concern about their governance arrangements and has requested assurances from the leader of the council about the best use of taxpayers’ money.”