Executive Summary
Authors: James Brackley, Adam Leaver
This briefing responds to the recent section 114 (s114) notice at Birmingham City Council (BCC) in September 2023, described as the ‘effective bankruptcy’ of Europe’s largest authority.
Part 1 of this briefing challenges the accepted view that the s114 notice was solely due to a poorly managed equal pay liability. We show that the council was already very close to an effective bankruptcy, and explore why the auditors failed to identify potential going concern issues in this case. We find that the issues at BCC are typical of sector-wide problems as only 5 out of 467 local government bodies’ audits were signed off on time in 2023.
Part 2 asks ‘what next?’ as BCC tries to find £300m of savings over the next two years and shore up a £700m deficit in its General Fund. We explore the implications of committing to ‘hard’ (as opposed to ‘soft’) budgetary cuts, the consequences for the delivery of statutory services, and longer-term financial viability of the Council. In particular, we explore how the proposed asset sales may satisfy the section 114 tests, but create further problems and add more future costs. We make several recommendations in relation to value for money and public accountability.
The recommendations we make in these briefs are summarised below:
- Provide a full assessment of whether cuts outlined in the 2024/25 budget consultation risk putting the council in a position in which they are breaching their statutory duties to vulnerable people.
- To assess the medium and long term costs created by these cuts to the Council, the NHS, and the wider local economy.
- Provide a full value for money and public interest case for any proposed asset sales, and not engage in asset sales simply to underwrite transfers between reserves.
- Request an independent assurance statement on the equal pay liability, along with full disclosure of how the amount has been calculated and what audit work has been performed.
Briefing note part 1: Understanding the section 114 notice →