Birmingham’s bankrupt budget

After declaring bankruptcy in September 2023, Labour-run Birmingham City Council (BCC) has been under direction from eight commissioners appointed by Conservative Secretary of State for Levelling Up, Housing and Communities Michael Gove, some getting paid more than £1,000 a day. They have formulated a budget that will balance the books by squeezing the working class even harder. To ‘save’ £300m, BCC is: cutting £24m from adult social care; cutting £19m from children’s social care; dimming street lights; reducing bin collections; and scrapping nearly all arts funding. It is also raising council tax by 10% (up from a 3% increase last year). BCC also plans to sell off £750m of public infrastructure, including schools and housing, through a capitalisation programme.

Like many local councils, BCC has faced a dramatic fall in the money it gets from national government –losing around £875m since 2010. This is offset by £318m through the retention of local business rates. But business rates, too, have been falling. In 2019 local businesses paid £557m in rates, representing one of the largest sources of income for the council. BCC came close to declaring bankruptcy during the Covid-19 lockdown as business rates fell to £394m in 2021/22. Rates are predicted to fall to £375m in 2024/25 as businesses continue to close.

Capitalist crisis is not only bringing about a fall in income for BCC, but a rise in costs as prices go up. While huge energy and housing companies make record profits the government sees fit to leave these profits largely untouched and allows the purchasing power of councils to diminish. In his Spring Budget 2024, the Chancellor Jeremy Hunt announced no new measures to adequately fund local services. If this contradiction continues, the problem of council bankruptcies will spread, with one in every five councils predicted to go bankrupt in the coming years.

Joe Smith