Control of ‘bankrupt’ Birmingham council to be handed over and inquiry launched

Sign up for the View from Westminster email for expert analysis straight to your inbox Get our free View from Westminster email Please enter a valid email address Please enter a valid email address SIGN UP I would like to be emailed about offers, events and updates from The Independent. Read our privacy notice Thanks for signing up to the View from Westminster email {{ #verifyErrors }} {{ message }} {{ /verifyErrors }} {{ ^verifyErrors }} Something went wrong. Please try again later {{ /verifyErrors }} Michael Gove has announced he will appoint commissioners to take over Birmingham City Council and will launch an inquiry into Europe’s largest local authority after it declared itself effectively bankrupt. The government’s communities secretary told the Commons he was ‘satisfied that Birmingham City Council is failing to comply with its best value duty’ after it issued a Section 114 notice earlier this month – meaning it is unable to meet its financial liabilities. Announcing his plans to intervene on Tuesday, Mr Gove told MPs: ‘I do not take these decisions lightly, but it is imperative in order to protect the interests of the residents and taxpayers of Birmingham, and to provide ongoing assurance to the whole local government sector.’ And the minister warned that it has ‘sadly’ been the case during similar interventions in the past that the government has needed ‘to increase council tax in certain circumstances’. The council has blamed £760m of equal pay claims, the expenses of a new IT system, and years of funding cuts by successive Tory governments for its financial woes. It has an in-year financial gap in its budget of £87m – projected to rise to £165m in 2024/25. Earlier on Tuesday, the cash-strapped council warned – in a report outlining its proposed financial recovery plan, ahead of an extraordinary meeting next week – that it faces an urgent ‘redesign’ likely to require asset sales, cuts to staffing levels and an increase in local taxes. Issued on behalf of council chief executive Deborah Cadman, the document said the council ‘acknowledges that the current situation will create uncertainty, and in some cases disruption, and unreservedly apologises’. Warning that ‘the residents and businesses in Birmingham deserve better’, Mr Gove told MPs that, under his proposals, the commissioners will exercise all functions associated with the council’s governance, strategic decision-making, financial governance, and senior appointments. Michael Gove warned that ‘residents and businesses deserve better’ (UK PARLIAMENT/AFP via Getty Images) Mr Gove said they will have the power to make decisions directly if needed – adding he is ‘minded’ to implement the package he has set out and that the city council has five working days to make representations. If his plans go ahead, the council would also – under the oversight of commissioners – draw up and agree upon an improvement plan within six months, Mr Gove said. That plan would set out how the council will ‘make the necessary improvements to the whole council to return it to a sustainable financial footing’, he added. The communities secretary said the local inquiry will ‘consider the more fundamental questions around how Birmingham got to this position and options for how it can become a sustainable council moving forward that secures best value for its residents’. But his opposite number, deputy Labour leader Angela Rayner, said the string of councils declaring bankruptcy in recent years had been ’caused by the Conservative’s wrecking ball’ – pointing to the fact that only one council had issued a section 114 notice prior to 2010, with eight doing so since. Birmingham City Council declared itself effectively bankrupt earlier this month (Getty Images) ‘Local authorities across the country are struggling,’ the shadow communities secretary told the Commons. ‘After 13 years he can’t seriously say that it is all their own fault.’ Pointing to warnings that a further 26 councils are at risk of bankruptcy, Ms Rayner added: ‘What work his department is doing to support local authorities that are warning of financial distress now? ‘The truth is, this crisis in local government has been caused by the Conservative’s wrecking ball, with every swing another local council is pushed to the brink, and another local community falls over the edge.’ But Mr Gove hit back that ‘this intervention in Birmingham, like our intervention in Sandwell, like our intervention in Liverpool, have all been interventions in Labour-led local authorities that have comprehensive mismanagement extending back over years’. Angela Rayner blamed the Tory ‘wrecking ball’ for pushing councils ‘to the brink’ (UK Parliament/AFP/Getty) While he warned that ‘council taxpayers elsewhere in the West Midlands must not be on the hook for failures that occurred in Birmigham’, Mr Gove said the government is ‘prepared to extend additional financial support to the city’. But Mr Gove pointed out that ‘it has sadly been the case in the past with local authorities that have failed, like Croydon and like Slough, that we have needed both to increase council tax in certain circumstances and to dispose of assets’. ‘It is too soon to say what the precise mix of interventions that may be required are,’ he said. Responding to Mr Gove’s statement, Local Government Association chair Shaun Davies warned that English councils face a funding gap, ‘at the very least’, of nearly £3bn over the next two years. ‘None are immune to the risk of running into financial difficulty and others have already warned of being close to also having to issue Section 114 notices themselves,’ he said. ‘Councils’ ability to mitigate these stark pressures are being continuously hampered by one-year funding settlements, one-off funding pots and uncertainty. ‘The government needs to come up with a long-term plan to manage this crisis which must include greater funding certainty for councils through multi-year settlements and more clarity on financial reform.’ Additional reporting by PA