UK

Starmer: Versions of Birmingham Council financial distress across the country

Labour leader Sir Keir Starmer has said he would look at a settlement for local authorities across the country (James Manning/PA)
Labour leader Sir Keir Starmer has said he would look at a settlement for local authorities across the country (James Manning/PA) Labour leader Sir Keir Starmer has said he would look at a settlement for local authorities across the country (James Manning/PA)

Labour leader Sir Keir Starmer has said there are versions of the financial crisis at Birmingham City Council “across the country” as he pledged to look at a settlement for local authorities.

The Labour-led local authority, Europe’s largest, declared itself effectively bankrupt on Tuesday when it issued a Section 114 notice.

The announcement means all new spending will stop immediately with the exception of protecting vulnerable people and statutory services.

Speaking on BBC Breakfast on Wednesday, Sir Keir said he “feels” for the city’s 1.1 million taxpayers.

He said: “I feel for the residents affected by this because they’ll be very worried about their services.

“I think, if you take a step back from Birmingham, you will see there are versions of this across the country.

“And that’s because, for 13 years, local authorities have been stripped of the funding they need.

“So we will have to look at that again.”

Birmingham Council has been grappling with an equal pay liability which has grown over several years.

It now is estimated to stand at around £1 billion and is increasing by millions of pounds per month.

Birmingham City Council is the latest of several councils to issue a section 114 notice since 2000 (Joe Giddens/PA)
Birmingham City Council is the latest of several councils to issue a section 114 notice since 2000 (Joe Giddens/PA) Birmingham City Council is the latest of several councils to issue a Section 114 notice since 2000 (Joe Giddens/PA)

It is also facing an in-year financial gap in its budget which is currently in the region of £87 million, and is having to spend around £100 million on fixing errors in the implementation of a new IT system.

However, at a cabinet meeting on Tuesday, the council’s deputy leader, Sharon Thomas, said the local authority has “had £1 billion of funding taken away by successive Conservative governments”, which has contributed to the issue.

Birmingham becomes the latest of several councils to issue Section 114 notices this century, after Hackney, Northamptonshire, Croydon, Thurrock, and Woking.

Sir Keir told BBC Breakfast that longer-term settlements for local authorities are needed.

The Local Government Information Unit has previously said the funding system for local councils is “inconsistent, fragmented and short-term” and is “driving dozens of councils across the country to financial ruin.

Sir Keir said: “We will have to look at a settlement across the board with all of our councils.”

He added that Birmingham is just the “latest example” and that councils of “all political persuasions” are struggling.