The Audit Reform Lab – a collection of academics at Sheffield University who examine audit failures – has called for a public inquiry into the financial collapse of Birmingham City Council, claiming the wrong route to rebalance its books has been taken.
A report from the Lab – commissioned by the GMB, Unison and Unite unions – claims that the council’s problems had been “misdiagnosed” from the start.
Birmingham City Council was declared bankrupt in 2023 following a £100m overspend on a new IT system and a huge increased in the estimate of payouts in regard to equal pay. As a result of the bankruptcy, the council was ordered to deliver £750m of asset sales and impose some major cuts to its services.
The Audit Reform Lab investigation suggests the wrong decisions were made and that a more “supportive route” to recovery is available, refocusing intervention away from cost-cutting and asset sales and towards best-value delivery.
“We would advise against any fire sale of assets that simply underwrite transfers between reserves, recommending that asset sales are only advisable where they have a demonstrably net positive impact on the revenue budget (ie, the sale of loss-making assets only),” said the report.
The council has been steadily selling assets through a number of Bond Wolfe auctions, raising around £6m so far, has instructed LSH to sell a portfolio of ground rents for around £20m and earlier this month announced plans to potentially offload 755 homes at Perry Barr to a third party.
The Audit Reform Lab wants to see a new recovery plan for the city that gives the council longer to balance its books and stops the “absurd situation” of being forced to sell revenue-generating assets.
Photo by NEIL HALL/EPA-EFE/Shutterstock
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