Facing up to the financial facts

By on 31/08/2010 in Blog

Stephen Hughes, Chief Executive at Birmingham City Council, has written the following open letter to staff on the financial situation that the authority currently faces.

It appears in the latest edition of the council’s staff magazine Inner Voice, which was published today (August 31).

Stephen Hughes

The new Government has set, as its first priority, reducing the national public sector spending deficit.

Currently, the public sector as a whole spends £160billion more each year than it raises in revenue.

That is about £3,000 for every person living in the UK.

A sizeable and growing part of its spend goes to pay interest on the amount borrowed.

To deal with this problem, the Government has cut £6billion from this year's public spending. Birmingham City Council's share of that so far amounts to £13million in revenue funding, and £3million in capital funding.

In consequence, some reductions in projects funded by Working Neighbourhood Fund or Area Based Grant have been made.

The Government has also announced a Comprehensive Spending Review that will report on October 20. Apart from protected areas (mainly NHS), the rest of departmental expenditure (which includes local government) has to find, on average, 25 per cent savings in real terms.

However, defence and education have been partially protected - and it is likely those areas will only be reduced by ten per cent. Therefore, that means the rest (which includes most of what the City Council does) will have to reduce by about 30 per cent - plus.

Finance colleagues have done some detailed work on this. Our best estimate at present is that the City Council will need to reduce its net expenditure by £330million over the next three to four years: £230 million from the council’s core budget, and £100million from specific grants.

That is about a third of our net spend.

It is really difficult to convey how big a problem that is. My latest attempt is to make an analogy with Business Transformation.

We started that in 2006 and by 2013 we will be saving about £100million per annum net of costs. To do that, we have had to throw the organisation into the air and cause considerable turmoil and concern - but the benefits have been worth it.

This new challenge requires us to save three times as much in half the time!

In previous messages, I have talked about the approaches we have looked at, including the Leader's five principles for getting more from less: business transformation, prevention, personalisation, collaboration and self-sufficiency.

I have also referred to the work that was presented to members in June, about cutting the 'back office', increasing assets sales, exploring market testing, maximisation of income, future business transformation benefits and improving productivity.

These make some contribution (we have found roughly £90million per annum so far) to dealing with the problem, but they go nowhere near far enough.

The truth is, that if we are to protect the public from the consequences of these spending reductions, we need revolutionary change in the way we provide services.

We are going to have to look at ideas that might have seemed inconceivable only a short time ago. There will inevitably be resistance to such changes - not just from staff and others directly affected, but from elected members and the public and media generally.

So a key first task is about having an open and transparent dialogue with key stakeholders, including staff, about the scale of reductions needed and the ways we might deal with them.

The Leader agrees with me on this, but before it can begin, the two of us need to discuss and agree the approach with other Cabinet members.

So for now, I cannot tell you anymore. It's not just because of the need for agreement on the way forward - it's that I don't know what ideas we need to follow and consult on.

I am grateful for the many suggestions staff have already sent in - they are all being carefully evaluated. In my mind, nothing can be ruled out at this stage.

I am mindful of the need to find solutions that minimise the impact on individual members of staff, and of course our customers - the people of Birmingham - whilst meeting the financial imperative.

But I cannot promise that everyone will still have a job at the end of this period. We are going to be a much smaller organisation.

I will do my best to ensure you know what is being thought about as soon as possible, and give you every opportunity to contribute.

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There Are 2 Brilliant Comments

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  1. Daz says:

    Things that seemed inconceivable like charging a realistic level of Council Tax?

  2. penfolduk01 says:


    Council Tax only raises roughly 10% of a council’s revenues. The vast majority of revenue comes from general or specific government grants.

    £330 million is around the TOTAL amount Birmingham raises in Council Tax in a year. So to make up the projected cuts you would have to double Council Tax.