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Upgrade minister Michael Gove will appoint commissioners on Tuesday to take over the day-to-day running of Birmingham City Council after it was declared effectively bankrupt.
People familiar with the matter said Gove will announce a technical consultation period and may appoint a commissioner within weeks. They added that Gove “deliberately” made the appointments.
Commissioners will be responsible for the council’s finances and are expected to sell assets to raise funds – potentially including the city library, land and its stake in Birmingham Airport.
If appointed, the councilors would be the latest to be appointed by central government to oversee the finances of local government bodies, following similar moves by Woking and Thurrock councils.
Birmingham City Council said it did not comment on speculation.
The government said it had been “regularly engaging” with the committee “about the pressures it faces”. . . (We have) serious concerns about its governance arrangements.”
It added: “We have asked council leaders to provide written assurances that any decisions on equal pay issues at the council represent the best value for taxpayers’ money.”
Birmingham announced a Section 114 notice this month, indicating it would not be able to break even this year. The report said the immediate trigger was a recent surge in equal pay claims brought by thousands of workers, mainly women, which could amount to more than £750m.
The council has an estimated £87.5m budget shortfall this year but its finances and leadership have long been in disarray.
It has spent £1.1bn on the equal pay settlement agreed a decade ago, partly funded by asset sales. A £75m IT overspend, rising demand for services, reduced central government revenue and dysfunction within leadership also contributed to the latest crisis.
Previous government improvement notices, Published 11 years ago The bill was not scrapped until May in a bid to turn around the performance of the council’s children’s services arm.
In the same month, Labor replaced local authority leaders across the country amid concerns about the leadership and governance of parliamentary groups.
Senior Tory figures blamed Labour, which has led the council since 2012, for the latest defeat.
The National Labor Party did not respond to a request for comment. Shortly after the Section 114 notice was announced, parliamentary deputy leader Sharon Thompson told the Financial Times that the agency was “digging deep” to determine the size of its liabilities, acknowledging that the process would be ” painfully”.
Birmingham City Council’s defeat comes against the backdrop of a growing financial crisis for local government in England, with funding from Whitehall declining for more than a decade.
The authority has had to save £1 billion since cuts to local authority budgets began in 2010 due to austerity measures.
The industry has lost £15bn in funding over a decade as inflation took a larger-than-expected impact on the funding deal struck by ministers last year.
Some councils, including Woking and Thurrock, have declared virtual bankruptcy after risky financial decisions – often aimed at raising revenue – proved disastrous.
A local government insider involved in turning around struggling councils said “many” other places “have moved into potential section 114 territory” this year, not because of any specific financial decisions but because of ongoing pressure.
The person, who expects services to be cut and closed by April next year, said there were “wider financial issues starting to emerge” in the sector, with the current high demand for children’s services being a particular concern.
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