Birmingham's Labour-run council is facing a £625 million deficit by 2016/2017. Budget cuts of up to 50% are planned. What public services will survive?
Europe’s largest local authority is projected to face a staggering £625 million budget shortfall by 2016/2017, an estimate revised upwards earlier this month.
The cuts in Birmingham are biting, and they are biting with the “jaws of doom”. This influential graph, given its name by the Labour council leader implementing the cuts, demonstrates the divergent paths of projected revenue and expenditure over the next few years.
Figure 1 below, as well as the other statistics used in this article, can be found in the budget consultation document released by the council last month:
Communities minister Eric Pickles is dramatically reducing central government grants to councils around the country. Birmingham, perceived as expensive and profligate, is being singled out for special treatment. While proposed cuts nationwide to local authorities average £74 per person, in Birmingham the figure is £149.
Whitehall intends to reduce the city’s total grant by £310 million between now and 2016/2017. If this happens concurrent with a similarly sized projected increase in expenditure, this will leave a gargantuan deficit on a scale never before faced by a UK local authority.
At present just £1.3 billion of Birmingham’s £3.5 billion budget is ‘controllable’, with the remainder fixed by statutory requirement or already allocated to programmes such as school funding.
Therefore, the £625 million in prospective reductions forms a remarkable 50% of controllable expenditure, with £110 million (8%) of cuts to come in 2013 alone, as Figure 2 shows:
In the words of Sir Albert Bore, leader of Birmingham city council, this means “the end of local government as we know it”. In a recent consultation meeting in the southern suburb of Cotteridge, he explained the crisis to a large and angry crowd of Birmingham council taxpayers. He repeatedly reiterated efficiency savings would not be enough, contrary to the claims of Pickles and Whitehall. Birmingham has already saved £275 million, reducing staff by a huge 27% in the process.
Most in the audience were not just unsympathetic to his position but vocally upset at the fact a Labour-run council is implementing such deep cuts.
One man bluntly summarised the feelings of many:
“You were not voted in to do this. We voted for a Labour council, not a Tory one.”
One of the reasons highlighted by Bore for the city’s colossal revenue shortfall is the fact the previous Conservative-led administration kept council tax increases artificially low, at just 1.9%, for five successive years. Rates have been frozen for the past two, and the decision for 2013/2014 is to be announced soon.
Two thirds of Birmingham’s budget comes directly from central government rather than from taxation and other sources, a far higher proportion than most local authorities.
As a large and deprived local authority, Birmingham needs government funding more than other areas, yet is seeing deeper cuts, as Figure 3 shows:
Bore made few concessions to appease his incensed constituents at the consultation meeting. A man repeatedly interrupted to accuse the council of deliberately sidelining ethnic minorities by not holding consultation meetings in their communities.
Others called for open resistance to central government. ‘Liverpool defied Thatcher. Why can’t you defy a weak coalition?’ asked one woman. “I will not take the Labour Party and Birmingham down the obscene chaos route that Derek Hatton took Liverpool down,” Bore responded to her and the other malcontents advocating outright insurrection.
The most common accusation seemed to be that Birmingham’s Labour leaders are not putting up enough of a fight against its Whitehall paymasters. “You’re just standing there and doing nothing, but all of us want to fight back,” volunteered a teenage boy with his mother’s encouragement.
Some commitment has been demonstrated to opposing grant reductions imposed from London. Bore has teamed up with leaders of other big cities in the Midlands and North to form a ‘supercabinet’ against the plans. Large metropolitan authorities are being hit hard across the country. In Newcastle for instance, just eight of the city’s 18 public libraries are likely to remain open if proposed budget cuts are implemented this coming month.
Bore had little choice but to reject calls to maintain existing spending levels, explaining “the likelihood of borrowing money to cover these cuts is almost nil”. The council has already borrowed vast sums as a consequence of a landmark ruling by the Supreme Court in October. The following month, Birmingham was ordered to pay £757 million to the women it had systematically underpaid for decades.
Four hundred and twenty nine million pounds was initially borrowed from government for this settlement, a figure recently increased by £100 million. However on Tuesday it was announced Birmingham could not borrow any more, and there would be a £200 million shortfall. Pickles appeared to suggest in the House of Commons last week council owned assets, such as the airport and NEC, should be sold.
It is unclear what will happen next to Britain’s second city. If budget reductions happen at anywhere near the extent projected, that will necessarily mean scaling back front line provisions or abolishing them altogether.
Such changes are likely to hit the poor disproportionately hard, as they are more likely to use and benefit from council services. These proposed cuts seem likely indeed to mean the end of local government as we know it in Birmingham.
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• Pickles needs a friend – October 3rd, 2011