Latest Public Sector News

17.09.18

Deficit-ridden Birmingham council faces £84m shortfall in Commonwealth Games funding

Birmingham City Council is facing a reported £84m hole in funding for the Commonwealth Games as councillors scramble for a solution after being given a section 24 notice.

Europe’s largest local authority has burnt through £116m of emergency reserves in the past two years and is currently spending £75m more per year than it can afford, according to an audit report.

The council needs to make £52m of savings over the next 12 months to balance the books, but £180m must be raised locally to finance the hosting of the 2022 Commonwealth Games.

The government will pay 75% of the £750m cost of hosting the event, which was stripped from Durban in South Africa because of its own financial troubles, and the exact Commonwealth Games budget is still being finalised.

Accountancy firm Grant Thorton issued the S24 notice, which acts as a severe warning of financial mismanagement and is the city’s second in two years.

This triggered a full council debate last week, where councillors discussed the financial challenges – with one member declaring it “a total and absolute disaster.”

Another councillor said it was “hard to imagine a report that got much worse,” and Conservative leader Rob Alden said that this was now the “last-chance saloon.”

The audit report did say that they were satisfied with the council’s proposed management and delivery of the event, but that “the key risk is the cost of hosting the Commonwealth Games will impact on the council’s future financial sustainability.”

At one point, Birmingham City Council’s emergency savings fund dropped to £72.2m, leading to the council having to refinance and reschedule its debt payments, although it did argue it was never at risk of becoming insolvent.

The council used £63m of it its savings last year and plans to use another £30m to meet this year’s budget shortfall.

In response to the latest development, a Birmingham City Council spokesperson said: “The public and private sector has proven its ability to come together to host the biggest sporting and cultural event in Birmingham’s history – doing what normally takes three years, in the form of the Games bid, in less than one.

“As part of this local share, other neighbouring councils, the Midlands Engine, WMCA, Local Enterprise Partnerships, businesses and universities have all committed to making financial contributions that recognises the importance of the games not only to the city but to neighbouring districts and to the wider regional economy.

“A Games budget review is ongoing, and once complete, an update will be provided, followed by regular, transparent financial updates during the lifecycle of the Games.”

The athlete’s village and swimming complex and the new Metro tram lines and bus systems still need to be built, and the city’s Alexander athletic stadium also needs to be upgraded to a 50,000 capacity.

Leader of Birmingham City Council, Ian Ward, said: “We are currently working on our budget proposals for the coming year and this will mean making difficult choices which may be unpopular but will be necessary in what remains an extremely challenging national climate. The public and businesses will be consulted on these proposals in November 2018.”

The National Audit Office was warned that as many as 15 English councils could run out of money, with several authorities, such as Lancashire, Somerset and Suffolk, at risk.

Back in February, Northamptonshire CC became the first local authority in 20 years to issue a section 114 notice, banning all spending on non-vital services and the authority recently voted in favour of unitary restructuring proposals.

Top image: CaronB

 

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