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UK levelling-up secretary Michael Gove will on Tuesday move to appoint commissioners to take over the day-to-day running of Birmingham city council, after the local authority declared itself in effect bankrupt.
Gove will announce a technical consultation period that is likely to lead within weeks to commissioners being appointed, according to people close to the process. They added that Gove was “minded” to make the appointments.
The commissioners would run the council’s financial affairs and are expected to sell off assets to raise money — potentially including the city library, land and its stake in Birmingham City airport.
If appointed, the commissioners would become the latest to be charged by central government with overseeing the finances of a local government body, after similar moves at Woking and Thurrock councils.
Birmingham city council said it did not comment on speculation.
The government said it had been “engaging regularly with” the council “over the pressures it faces . . . and [we] have expressed serious concern over its governance arrangements”.
“We have requested written assurances from the leader of the council that any decision regarding the council’s issues over equal pay represents the best value for taxpayers’ money,” it added.
Birmingham this month declared a section 114 notice, indicating that it could not balance the books this year. It said the immediate trigger had been a recent jump in liabilities, potentially to over £750mn, for equal pay claims from several thousand mostly female workers.
The council’s budget shortfall for this year is estimated at £87.5mn, but its finances and leadership had long been in a tumultuous state.
It had already spent £1.1bn on an equal pay settlement reached a decade ago, funded in part by a fire sale of assets. A £75mn IT overspend, rising demand for services, dwindling income from central government and dysfunction within its leadership all also contributed to the latest crisis.
A previous government improvement notice, issued 11 years ago in an attempt to turn around the performance of the council’s children’s services department, was lifted only in May.
The same month, the Labour party nationally replaced the local authority’s leader owing to concerns over the council group’s leadership and governance.
Senior Conservative party figures have blamed Labour, which has led the council since 2012, for the latest failure.
Labour nationally did not respond to requests for comment. Speaking to the Financial Times shortly after the section 114 notice was declared, deputy council leader Sharon Thompson said the authority was “digging deep” to determine the scale of its liabilities and admitted the process would be “painful”.
Birmingham council’s failure comes against a backdrop of growing financial crisis across English local government, after more than a decade of dwindling Whitehall funding.
The authority has had to save £1bn since 2010, when local government budgets began to be cut back under austerity.
The sector lost £15bn in grants over a decade, with inflation eating into a bigger than expected funding settlement agreed by ministers last year.
Some councils have declared effective bankruptcy after risky financial decisions — often aimed at raising revenue — proved disastrous, including in Woking and Thurrock.
One local government insider involved in turning round struggling councils said “many” others were “entering potential section 114 territory” this year, not because of any specific financial decision but sustained pressures.
Predicting cuts and closures to services before next April, the person said the sector was “starting to see more widespread finance concerns”, with high demand for children’s services now a particular concern.