'Bankrupt' Birmingham approves 'devastating' 21% council tax hike and £300 million cuts

5 March 2024, 19:36 | Updated: 6 March 2024, 00:11

Birmingham City Council House during renovation works, May 21, 2023
Birmingham City Council House during renovation works, May 21, 2023. Picture: Alamy

By Kit Heren

Birmingham Council has approved a 21% rise in council tax and £300 million in cuts to public service cuts that could see streetlights turned off and bin collections slashed.

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Labour council leader John Cotton called the cuts "devastating" at a meeting on Tuesday night that saw the plan voted through, as he apologised to residents.

Mr Cotton told LBC: "I'm very sorry that we find ourselves in this position. I'm a Birmingham lad, born and bred - I've lived my entire life here, so you know this city matters profoundly to me, as do the communities that I serve as its leader.

"But I'm really clear as the new leader of this council that we've got to restore the council to financial stability, and we need to take some tough choices."

Birmingham City Council - Europe's largest local authority - is currently trying to fill a £300m hole after effectively declaring itself "bankrupt" last year.

The government earlier gave Birmingham City Council permission to bring in a 10% rise across each of the next two years, leading to a total increase of around 21%.

Andy Burnham speaks to Andrew Marr

Andy Burnham, the Labour mayor of Greater Manchester, said that poor decisions had been made in Birmingham, but that councils had seen their grants from central government cut "to the bone".

"Politics in this country, I'm afraid, feels pretty broken right now, and the way in which national government treats local government is one of the biggest illustrations of that," Mr Burnham told LBC's Andrew Marr ahead of the council vote.

Birmingham City Council House during renovation works, May 21, 2023
Birmingham City Council House during renovation works, May 21, 2023. Picture: Alamy

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It comes as multiple councils across the country battle to balance their books. Collective deficits among councils could reach £5.6 billion by 2026.

The Birmingham tax rise accounts for around an extra £340 on a typical Band D property - and could surge even higher as police and fire service look to increase charges.

Amid the tax hike, Birmingham City Council - which has a Labour majority of 65 councilors out of 101 seats - is also looking to make "devastating" cuts.

A total 600 council jobs could be slashed, affecting libraries, parks, and other public service projects.

Bin collections could also become fortnightly, instead of weekly, across the Midlands city, and street lights could be dimmed to save extra money on the council's energy bills.

Birmingham City Council issued two Section 114 orders last year, signalling it cannot balance its budget without help after effectively going bust.

The news in Birmingham comes a day after Nottingham City Council cut hundreds of jobs as well as additional social service cuts. Other cuts included public toilets and pest control services.

Councillors were reportedly reduced to tears as they passed the legislation approving the money-saving measures.

Nottingham City Council approved the decision for council tax to rise by 4.99 per cent - the maximum that the government has approved.

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It comes after Michael Gove, the government minister responsible for councils, was yesterday accused of advising councils on how to "spend better the money they haven't got", amid fears more local authorities will declare effective bankruptcy.

Labour deputy leader Angela Rayner said the Government had created a "begging bowl culture" by making councils bid for money as she pressed the case for a long-term funding settlement.

Labour MP Clive Betts, who chairs the Levelling Up, Housing and Communities Committee, added in the Commons: "The select committee recently produced a report on local government finance and we said the Government must act now if local authorities are to survive the severe crisis.

"What has the Secretary of State done? He's asked every local authority to produce a productivity plan. It sounds a bit like him advising councils how to spend better the money they haven't got.

"In particular, he's asked local authorities to identify ways to reduce wasteful spend. What do you think local authorities have been doing for the last 13 years and, even more in particular, he's asked them to identify waste on discredited staff, equality, diversity and inclusion programmes?

"How much does he think that's going to save towards avoiding section 114 notices?"

Communities Secretary Mr Gove replied: "He's right, of course, there are challenges that local government faces, but there are outstanding councils like, for example, North Lincolnshire or South Norfolk, that are continuing to ensue that they can build up surpluses and deliver effective services and that's because they put productivity first.

"There are some local authorities, lamentably, that are not putting productivity first."

South Cambridgeshire was among the councils criticised by Mr Gove due to its trial of a four-day week. The local authority has previously said there was strong evidence the approach was helping with recruitment and retention. It also said sickness rates had fallen by a third and complaints about services involved in the pilot had reduced.

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