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Business leaders in Greater Birmingham have today called for a clear plan of action to ensure the impact of the city council’s financial crisis is minimised for residents and companies.
Europe’s largest local authority announced yesterday it was issuing a Section 114 notice and that it would stop all but essential spending after effectively declaring itself bankrupt amid an outstanding £760 million bill to settle equal pay claims.
This has been compounded by the recent implementation of a botched IT system whose costs have reportedly spiralled to £100 million.
However, Cllr John Cotton, leader of the Labour-run council, insisted vital services would be protected while deputy leader Cllr Sharon Thompson described the decision as a “necessary step to get us back on strong financial ground”.
The council’s Tory group leader Cllr Robert Alden claimed the cabinet was living in “cloud cuckoo land” to suggest the issues were not the result of its own failings.
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Greater Birmingham Chambers of Commerce said workable solutions must be found to ensure the impact of the crisis was minimised.
Chief executive Henrietta Brealey said: “There are clearly huge questions to be urgently answered regarding the impact of this development on support and services for the city, its businesses and most vulnerable residents and what has led the council to this point.
“Birmingham City Council must move quickly to present a clear and credible plan for minimising the fallout from this situation and working back to an even keel.
“As a city, Birmingham and its business community tell a very different story to the current difficulties of its local authority. It’s one of the fastest-growing city economies in the UK, with a transformed city centre and extensive regeneration and investment under way.
“It is attracting record levels of foreign direct investment and continuing to feel the positive impact of last year’s successful Commonwealth Games and the opportunities created by HS2 while being home to both longstanding anchor institutions and attracting new leading businesses.”
West Midlands Conservative Mayor Andy Street hit out at the authority’s leadership, describing the news as “deeply disturbing” but stressed the city was still open for business.
He said it raised serious questions about the leadership and the decisions they had taken over the past decade.
“When the news of the equal pay bill, which according to reports has now spiralled to more than £1.1 billion, first broke, we were all assured by the council that, despite the seriousness of the situation, they would produce a plan as to how they could settle the bill.
“I stood ready to support and help once that plan had been produced, irrespective of political colours. However, more than two months on, no plan has emerged. Instead, we are simply presented with what is effectively a bankruptcy notice and an admission of defeat.
“The city of Birmingham deserves so much better and truthfully I am incredibly concerned that citizens and the services they rely on have been let down in this way.
“It is no secret that local authorities up and down the country have faced significant cuts over the past decade, even if the funding from Government has been improving in recent years, and it has been a real challenge to keep services running to the standard that people expect.
“However the huge majority of councils of all political colours are managing to achieve this, with bankruptcy extremely rare.
“Birmingham remains firmly open for business. However bad this announcement, I will play my part to ensure the city gets through this.”
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