Government Appoints Commissioners to Take Over ‘Bankrupt’ Birmingham Council

UK levelling-up secretary Michael Gove has announced he will appoint commissioners to take over the Birmingham city council after the local authority declared itself in effect bankrupt.

A local inquiry will be launched in “due course” to understand how Birmingham got to this position and the options moving forward, Mr. Gove added, as he addressed the House of Commons on Tuesday.

At the beginning of September, Birmingham council issued a Section 114 notice, after it failed to settle a £760 million bill on equal pay claims.
It announced the termination of all new spending, with the exception of protecting vulnerable people and statutory services.

Adding to the council’s financial struggles was the “flawed implementation” of the Oracle ERP software system. The initial cost of the system was around £19 million, but after delays and attempts to customise it, the council was faced with an estimated bill of £100 million.

“Poor leadership, weak governance, woeful mismanagement of employee relations and ineffective service delivery have harmed the city. I do not take these decisions lightly, but it is imperative in order to protect the interests of the residents and taxpayers of Birmingham and to provide ongoing assurance to the whole local government sector,” Mr. Gove said in parliament.

The commissioners will work with the council, which is expected to lay out plans within six months on how it can return to a sustainable financial footing.

As the commissioners seek ways to raise money, they could decide to sell off assets, such as the city library, land and the council’s stake in Birmingham airport.

In Birmingham’s case, Mr. Gove said it was “too soon to say” what the required mix of interventions would be.

The Labour-led Birmingham council is the largest local authority in Europe. It is run by 101 councillors, including 65 Labour, 22 Conservative, 12 Liberal Democrat, and two Green.

It is the latest council to have announced its effective bankruptcy, following similar cases of the Woking and Thurrock councils. In 2022, the government appointed commissioners to both Liverpool and Sandwell councils to oversee the authorities’ financial management.

“Eight councils have issued a 114 notice, with another 26 councils are at risk of bankruptcy over the next two years,” Ms. Rayner said.

She accused the Tories of underfunding local authorities and then blaming them for financial failure.

Mr. Gove said that he didn’t intend to draw the party politics into the discussion, but in response to Ms. Rayner, he noted that just like Birmingham, both Liverpool and Sandwell councils were Labour-run.

The Birmingham council will hold an extraordinary general meeting on Monday to look into a financial recovery plan. This is in accordance with Mr. Gove’s direction to the council to deliver on his proposals.

“It is important that we all get to the bottom of how we found ourselves in this position,” Mr. Gove said, as he announced a local inquiry to assess the council management issues among other matters.

Mr. Gove appointed Max Caller as the commissioner to lead the intervention.