Stephen Hughes, Chief Executive of Birmingham City Council, comments on recent reports about the state of the authority’s finances…
Reports in the media this week, relating to the council’s financial position, have been rather confused.
They unhelpfully conflated issues about investment with those around managing the budget. Just to be clear, we do not have a deficit and are not “in the red”.
Firstly, we do not need to make any “savings” to fund our capital programme or finance the £2.2billion borrowing we have taken out to support it.
Of the £2.2billion about £1.1billion is directly financed by Government grant. A further £700m is self financing investments such as Business Transformation, NEC refinancing, loans and the purchase of the Pallasades as part of the New Street Station development.
The remaining £400million prudential borrowing is supported by the revenue budget and is for the Decent Homes programme, Library of Birmingham, settlement of equal pay claims and other investments.
The cost of this borrowing (interest and repayments) is fully included in our revenue budget and long term financial strategy agreed by the Council in February and predicated on a 1.9 per cent Council Tax rise for each of the ten years in the plan.
Secondly, the need to reduce staff numbers by 800 has been previously reported as part of the Business Transformation efficiency programme for the current financial year.
The reduction is already more than 400 for the year. We intend to avoid compulsory redundancies as far as possible, but where that is a possibility full statutory and informal consultation is taking place with staff and their representatives.
Thirdly, the reported overspend is currently forecast to be £26million by the end of March next year.
It arises from increased demand on our services and reductions in income largely as a result of the recession.
The council is taking active steps to mitigate these pressures by direct action and by identifying compensating savings, and a report to Cabinet next week will demonstrate that we have already reduced this overspend by more than half.
We have taken similar action in each of the past five years, and in every case the council has been able to balance its budget by year end. I remain confident that we will again this year.
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