FINANCE

Bumpy ride for Brum

Mark Conrad looks at what form intervention at Birmingham City Council is likely to take.

Amid local government's recent talk of super-charging the West Midlands' economy, pushing productivity rates closer to London's and driving regional growth, one uncomfortable truth often went unspoken: if Birmingham City Council cannot get its basic financial and project management right, or tackle governance and industrial relations issues that have restrained the city for decades, then there is less hope of major regional progress.

So, when levelling up secretary Michael Gove announced his huge five-year intervention at troubled Birmingham City Council on 19 September – the most comprehensive Whitehall-led ‘takeover' ever – few people familiar with Britain's largest council were surprised.

Birmingham issued a section 114 notice on 5 September, weeks after declaring a fresh and whopping equal pay liability of £760m by April 2025, with a further monthly cost of £5m-£14m thereafter if nothing is done. Yet, after delicate talks with trade unions, all parties failed to agree a new job evaluation scheme removing historical discrimination against women.
Failure to address its latest equal pay crisis led Birmingham to issue a second section 114 notice on 21 September, which buys the authority more time.
But amid continued austerity, ‘Brum' also faces an in-year budget deficit of £87m during 2023-24, as well as a shortfall of more than £100m in 2024-25. The authority faces a bill of £120m to correct high-profile problems with its Oracle IT project – and its political cultures were lambasted in a recent Labour Party report that ousted the city's former leader.
This combination of political, management and financial woes led Birmingham to freeze all non-statutory spending alongside its s114s and the council must shortly show how it will deliver a legal budget.
Add to this dysfunction soaring demand for costly, often poorly delivered, services and it is easy to see why any secretary of state, let alone a Conservative keen to placate former Red Wall voters before a General Election, would intervene in Labour-led Birmingham.
The secretary of state announced he was ‘minded to' send in a powerful team of Whitehall-appointed commissioners, led by ex-Hackney LBC chief Max Caller, to ensure Birmingham meets its Best Value duties under the Local Government Act. And Mr Gove left few dark corners of Birmingham off limits to commissioners.
Max Soule, deputy director at the Department for Levelling Up, Housing and Communities (DLUHC), wrote to Birmingham's chief executive, Deborah Cadman, explaining the scope of Mr Gove's proposed intervention. Mr Soule outlined likely directions which would transfer to commissioners Birmingham's powers over:

  • Governance and scrutiny of strategic decision-making
  • All functions relating to the appointment and dismissal of statutory officers 
  • All aspects of Birmingham's operating model
  • Control of strategic financial management
  • And all aspects of the council's performance management framework for senior officers

Mr Gove will also establish a local inquiry covering ‘the more fundamental questions around how Birmingham got to this position' – including failure to learn lessons from the 2014 Kerslake Review and the non-statutory intervention between 2015 and 2019.
In a moment of gallows humour, one Birmingham insider this week joked the scale of the intervention turns the authority into a ‘zombie' council, no longer in control of its core faculties. Meanwhile, the longer-term inquiry provides a convenient forum for a potential ‘blame game' likely to feature local politicians and officials, as well as some trade unions, the source said.
But what form will intervention at Birmingham take?
Officially, the authority was given until 26 September to respond to Mr Gove's proposals. A meeting of full council on 25 September provided an opportunity for elected members to raise concerns beyond the obvious discomfort of having little control. But it would be a surprise were Mr Gove to now water down his plan.
Publicly, Max Caller has stayed tight-lipped about his likely approach. At least until after Mr Gove officially appoints him.
But Mr Caller is a turnaround specialist with a well-established method. He has already led Best Value inspections at Liverpool City Council and Northamptonshire CC and was lead commissioner at Slough BC. He is also a former non-executive director at Birmingham, having been appointed in 2019 to advise on financial problems.
A senior source close to Mr Gove's intervention team told The MJ: ‘It's an open secret how [Max Caller] operates. Each intervention in local government is different, but the causes are often similar.
‘Interventions will almost always be about governance issues and about living within your means. There's a model that Max Caller knows works. We're likely to see him implement that model, at scale, even at an authority as big as Birmingham.'
In practice, that means Mr Caller could oversee a cap-busting hike in council tax and requests for DLUHC capitalisation directions to alleviate immediate financial concerns. Capitalisation directions will allow Birmingham to raise cash either by borrowing or through the sale of assets – and to use the receipts as revenues.
Amid high interest rates, expect some council-owned buildings to be sold. But sources close to Mr Caller this week reassured Birmingham's residents it would not become the fire-sale of assets – including valuable picture collections – reported by some media.
Arguably, Mr Caller's biggest challenge will be ending Birmingham's messy equal pay problem. Having settled earlier liabilities of £1.2bn following a landmark 2012 court case, Birmingham somehow managed to reintroduce a job evaluation scheme which unfairly rewarded some male-dominated roles – including waste collection – at the expense of predominantly female jobs of similar status. That has led to the fresh bill estimated at £760m and rising.
It was a shocking repeated error which council insiders claim happened, at least in part, because some local trade unions have become too powerful.
One source explained: ‘The situation with equal pay has been exacerbated partly because some local unions are also influential within the local Labour Party and have a strong say over which council candidates get selected. It makes some people reluctant to challenge powerful unions. Additionally, union officials worry about agreeing revised terms and conditions that benefit their male members.'
But trade unions at Birmingham point out that, as the employer, the council implemented the controversial job evaluation scheme. Unions say they recently engaged with Birmingham in ‘detailed' talks over a replacement scheme, but there was ‘a collective failure'.
‘To blame only trade unions for this would be unfair,' one union official told The MJ. ‘The council must take responsibility for failing to pay many women properly. Nobody has refused to discuss potential job evaluation schemes.'
Whatever the origins of Birmingham's equal pay mess, intervention experts believe it could take four years to fully implement the nationally agreed route for job evaluations developed by the Local Government Employers and national trade unions – rather than Birmingham's current bespoke model. All parties, including incoming commissioners, need to move fast.
But there is another spectre looming over Brum which threatens to ignite tinderbox relations with unions: service or staff cuts.
Several sources said it was ‘inevitable' that hefty cuts would form part of the council's book-balancing exercise. Non-statutory services will be slashed, and most experts believe statutory offerings won't escape unscathed.
‘It's likely this will include some staffing cuts,' one well-placed insider warned. ‘There are only a handful of ways to save or raise money at a council, and staffing is a significant cost. The catch-22 is that some trade unions unhappy about a potential new job evaluation scheme may end up with members who lose their jobs.'
In terms of the personnel needed to guide Birmingham's turnaround, experts believe Mr Gove and Mr Caller will be flexible. Instead of a fixed number of commissioners – who were not yet appointed as The MJ went to press – Mr Caller is understood to favour specialists tasked with improving specific council functions before moving on. For example, a short-term commissioner might be needed to fix the Oracle IT debacle, while another will focus longer-term on Birmingham's governance problems.
Interestingly, Birmingham's new political leadership quickly accepted the need for external assistance. Cllr John Cotton, Birmingham's leader, said: ‘On becoming leader, I was concerned there was a lack of senior capacity at the council to deal with the issues that we face – which is why we asked secretary of state Michael Gove and the Local Government Association to help us rebuild that capacity.'
Cllr Cotton vowed ‘to be on the side of our residents as we build a better Birmingham'. Local residents should prepare for a bumpy ride, though. 
Some services – and local relationships – may get worse before Birmingham gets better.

Editor's comment: A call for Caller, but where is the next gen?
 

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