\n<\/p>\n
Birmingham city council was \u201clikely never bankrupt\u201d and the decision to issue the section 114 notice two years ago was \u201cbased on unaudited and materially incorrect information\u201d, accounting experts have claimed.<\/p>\n
The Labour-run council issued a section 114 notice in September 2023, in effect declaring itself bankrupt, which triggered a wave of spending cuts and plans to sell \u00a3750m worth of assets. This prompted the government to appoint commissioners to run the council for five years.<\/p>\n
At the time, council leaders blamed a \u00a3760m bill for equal pay claims, problems installing a new IT system and \u00a31bn in Tory government cuts over the previous decade.<\/p>\n
However, having done a fresh analysis of the council\u2019s 2022-25 financial accounts, James Brackley, a lecturer in accounting at the University of Glasgow, claims the council underestimated its reserves position by more than \u00a31bn.<\/p>\n
The council\u2019s 2022-24 accounts, which were published in July this year after delays, show the council had \u00a3784.7m in general fund reserves \u2013 from which most services are funded \u2013 as of March 2024. In November 2023, the council forecast the 2023-24 reserves to be -\u00a3677.9m.<\/p>\n
Brackley told the Guardian: \u201cWe urgently need answers as to why the largest ever cuts and asset sales programme any authority has ever faced was able to be pushed through before a proper assessment of the council\u2019s financial situation had taken place.\u201d<\/p>\n
Brackley is one of 34 experts in accounting, finance and local government calling for an independent public inquiry to investigate the decision to declare bankruptcy.<\/p>\n
The experts sent an open letter, seen by the Guardian, to the housing and local government secretary, Steve Reed, last week calling for an inquiry to establish \u201chow and why such a damaging section 114 notice could have been initiated based on unaudited and, as has now come to light, materially incorrect accounting information\u201d.<\/p>\n
The Liberal Democrat councillor Paul Tilsley said he had always been concerned the decision to declare bankruptcy was \u201cpremature\u201d. \u201cThe letter from Brackley and his colleagues supports the stance that I and other colleagues have taken,\u201d he said.<\/p>\n
According to Brackley\u2019s analysis, the council underestimated and mischaracterised its reserves in 2023 and overestimated its equal pay liability at \u00a3650m to \u00a3760m.<\/p>\n
Although details of the equal pay settlement reached with the Unison and GMB unions this month remain confidential, in its latest financial accounts the council stated it had set aside \u00a3404m for its equal pay liability.<\/p>\n
Brackley also said the council attributed that liability to its general fund reserve, when it could have been paid for by its capital receipt reserve, as was later the case.<\/p>\n
The council said it was required to account for the potential liability for equal pay in 2023, not a potential settlement figure, and that would have put the council into a negative reserves position. At the time, it was unable to capitalise those costs, it said.<\/p>\n
In addition, the council said statutory ring-fenced reserves had to be used for a specific purpose and were excluded.<\/p>\n
The Conservative leader on the council, Robert Alden, said Birmingham residents had been left facing a \u201cdouble whammy of higher taxes for fewer services\u201d and blamed the council\u2019s \u201cbotched Oracle rollout\u201d and \u201cLabour\u2019s overspends over the last few years\u201d.<\/p>\n
In response, the leader of the council, John Cotton, said his focus in the past two years had been on dealing with \u201cequal pay, the re-implementation of Oracle and with tackling a huge budget deficit\u201d.<\/p>\n
\u201cWe continue to make progress on all three \u2026 This year we\u2019re on track to deliver a balanced revenue budget without the need for exceptional financial support for the first time in several years,\u201d he said.<\/p>\n
He said the council was working to \u201crepair the damage of 14 years of crippling Tory cuts that cost Birmingham over \u00a31bn, and under my leadership, this council has taken the tough decisions and decisive action\u201d.<\/p>\n","protected":false},"excerpt":{"rendered":"
Birmingham city council was \u201clikely never bankrupt\u201d and the decision to issue the section 114 notice two years ago was \u201cbased on unaudited and materially incorrect information\u201d, accounting experts have claimed. The Labour-run council issued a section 114 notice in September 2023, in effect declaring itself bankrupt, which triggered a wave of spending cuts and<\/p>\n","protected":false},"author":1,"featured_media":31527,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[48],"tags":[9862,15848,3748,1485,914,105],"class_list":{"0":"post-31526","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-politics","8":"tag-accountancy","9":"tag-bankrupt","10":"tag-birmingham","11":"tag-city","12":"tag-council","13":"tag-expert"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/31526","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=31526"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/31526\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/31527"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=31526"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=31526"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=31526"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}