How Birmingham went bust

The problem with socialism is that, eventually, you run out of other people's money. 

The truth of Margaret Thatcher's famous adage was proved last week, said Guy Adams in the Daily Mail, when Birmingham City Council filed a section 114 notice, essentially declaring itself bankrupt. 

The Labour-run local authority – the largest in Europe – has long been a byword for incompetence and "financial profligacy". Its flashy central library cost more than £180m to build. A new IT system was meant to cost £19m; the bill has exceeded £100m. The council has had to pay out more than £1bn in historic equal pay claims to female workers, with £650m still owing. Amid all this, Birmingham decided to host the 2022 Commonwealth Games, at a cost of £184m. 

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Documents leaked to the Mail also suggest that the service that transports disabled children to school is spending £230,000 a day, paying £60 to taxi firms for ten-minute journeys – ten times the market rate. Leadership is atrocious: the council has had seven chief executives since 2017. When it went bust, the current Labour council leader, John Cotton, was actually in New York, having gone there with his family to celebrate his 50th birthday.

'Political point scoring'

The Tories have "tried to score political points from Birmingham's woes" by blaming them on Labour, said The Guardian. "They bankrupted Birmingham," declared Rishi Sunak. "We can't let them bankrupt Britain." This is a "lazy attack line" that fails to explain why several councils run or recently run by Conservatives have issued section 114 notices: Thurrock, Woking, Northamptonshire. A group of 47 urban councils says that more than half its members are at risk of bankruptcy. Most of their problems date from George Osborne's period as chancellor, when central government funding fell by over 40%. 

Austerity led "with brutal efficiency to the evisceration of services", while councils were forced to sell assets and engage in risky speculation to balance the books. Woking has built up a vast £1.2bn deficit, investing in hotels and shopping centres. A "time bomb" is ticking under local government in the UK, and "the fuse was lit by Conservative economic policies".

'Ordinary Brummies will feel the brunt'

Councils' structural problems are immense, said Emma Duncan in The Times. Two-thirds of their budgets, on average, go on social care – largely the burden of looking after the growing number of older people. Legally, they have no choice but to pay such bills. Spending on most other services is optional. The resulting squeeze on services is "making Britain feel poorer and uglier", as funding for mending potholes, clearing up rubbish and cleaning off graffiti is slashed. 

In Birmingham, "every bit of council spending will now be subject to microscopic scrutiny", said Jane Haynes in The Spectator: cash for foodbanks and grassroots projects is being deferred. The city has been failed by national and local politicians. "It will be the ordinary Brummies who rely on local services who feel the brunt."