Alright Bab?

Posted on Sep 05, 2023. by NTI

Europe’s largest local authority has issued a Section 114 notice under the Local Government Finance Act 1988, which prevents all but essential spending to protect core services.

This will not come as much of a shock to many Birmingham residents, as the Council has faced difficulties over the last decade or so due to the equal pay claims. It has already paid out £1.1bn since 2012, and now says that it may have to pay up to a further £760m to settle further claims. This is as much as the council spends on services in a year.

The 2012 settlement followed a landmark court ruling which found hundreds of mostly female employees working in roles such as teaching assistants, cleaners and catering staff missed out on bonuses which were given to staff in traditionally male-dominated roles such as refuse collectors and street cleaners.

A local authority does not need the consent of councillors to issue a s114 notice and one is issued if a council’s CFO believes the authority cannot meet its expenditure commitments from its income.

Local authorities cannot be deemed insolvent (or ‘Bankrupt’ as the BBC helpfully describe it – we think they need some Introduction to Insolvency training!) but the notice is often described as being “effectively Bankrupt”. This means they cannot make new spending commitments and must meet within 21 days to discuss next steps.

Professor Tony Travers, a Visiting Professor in the London School of Economics’ Department of Government has said "People around the city don't need to worry that their bins aren't going to be emptied or that social care doesn't carry on.

"It will mean that no new spending can be committed, so there's nothing additional from here on.”

"But it also points to the fact that the budget for next year, 2024-25, will be terrifically difficult and it is not a problem that is going to go away."

But the Brummies are not alone.

The ‘black hole’ in local authority budgets is expected to grow to £5bn by April 2026, even after making £2.5bn of planned cuts. Thurrock, Croydon, Slough and Northamptonshire have all issued s114 notices in recent years.

The average council now faces a £33m predicted deficit by 2025-26, a rise of 60% from £20m two years ago. This has led to leisure centres being closed, care packages being reduced and fees for parking and waste collection being raised.

You can always rely on a Trade Union spokesman for more doom and gloom. Unison’s Head of Local Government (or perhaps that should be Head of Stating The Bleeding Obvious) Mike Short said councils were in the “direst of states” and “this is not a sustainable situation”, adding that “local authorities simply don’t have the funds to provide even statutory services”.

Funding for local authorities comes from a mix of council tax, business rates, services like parking and social housing rent and funds from Government known as the Revenue Support Grant.

Which all means Andy’s council tax bill to Birmingham City Council will no doubt go up next year (again) then…

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