An investigation by forensic accountants is likely to uncover a shortfall of more than £20 million in the amount of money Birmingham City Council requires to keep social care and education services running.

The forecast of a “black hole” left by the former Tory-Liberal Democrat coalition comes from the new council leader, Sir Albert Bore, who predicted that plugging the financial gap would cause “a great deal of heartache” in the controlling Labour group  and involve taking tough decisions.

Sir Albert is close to approving an urgent independent review of the council’s 2012-13 budget.

He expects the study, by an as yet unnamed company, to show that the city’s outgoing Tory-Lib Dem partnership failed to identify all of the £312 million savings demanded by the Government and raided cash reserves to shore up the Children, Young People and Families and Adults and Communities directorates.

In a wide-ranging interview with Chamberlain News, Sir Albert set out his stall for the Labour administration which took over a week ago:

• Birmingham businesses have to move on from the ‘pile it high and sell it cheap’ attitude of the past in order to become a city at the leading edge of developing new technologies.
•  Green and digital industries will be a focus of attention as Birmingham sets out a road map to become a city of enterprise.
• Labour will have failed if ways are not found to reduce unemployment and social deprivation, particularly among ethnic minority communities.
• A culture shift is planned in pushing forward with devolved services, and it is “all well and good” if that causes tension between the cabinet and new district committees.

Sir Albert revealed that senior council officers are unhappy he is describing the council’s financial difficulties as a black hole. “They don’t recognise my term. They talk about a risk,” he said.

The problem arises partly from a judicial review which prevented the Tory-Lib Dem administration from saving money by removing care packages from more than 5,000 vulnerable adults. The council has so far failed to decide how the cost of continuing to provide care will be covered.

The rest of the potential overspend arises from a failure by the previous council leadership to get to grips with the education budget, according to Sir Albert. Various proposals for savings were floated, including a controversial reorganisation of home to school transport, but all were rejected as too unpopular in the run-up to the May local elections.

There is a very strong likelihood that, without corrective action, the council’s finances will plunge into the red by the end of the financial year.

Sir Albert said: “The figure we are talking about is upwards and beyond the £20 million mark.

“This is one aspect that is going to give us a great deal of heartache. The room for manoeuvre is very limited.”

He said the creation of new jobs and improving workforce skills would be central to the new administration’s approach. Strategy is likely to focus on making far more of Digbeth’s growing reputation as a centre of software excellence for the electronic games industry, which Sir Albert believes can be used to replace more traditional manufacturing methods.

He said there were obvious synergies between the high-tech expertise displayed among many small companies in Birmingham and the requirements of modern motor vehicles which rely to a great extent on sophisticated computer programmes.

The former LDV Vans and Alsthom site at Washwood Heath will be brought to the market as soon as possible, if the council can persuade the Government to move a planned high speed rail maintenance depot elsewhere in the West Midlands. Sir Albert says a prospective occupier who is in talks with the council could create 6,000 new manufacturing jobs.

 

He wants to change the perception of Birmingham by concentrating on developing a ‘green, safe and smart’ agenda as well as championing new technologies.

Sir Albert said: “It used to be pile it high and sell it cheap. That epitomised Birmingham business activity.

“We need Birmingham to be acknowledged as a manufacturing city at the leading edge of technology in the important areas.

 

“It’s about getting away from where it was in the 1950s, 1960s and 1970s, where we were recognised as a city of business and trade but it was low value-added activity. We need to be seen as a manufacturing city of higher added value.”

 

In a clear reference to unfinished business from the pre-2004 Labour administration, Sir Albert emphasised the need to find ways of cascading the wealth of the city centre out to inner city wards and suburban areas. Previous attempts to address inequalities had failed over many years, he conceded.

“The map of inequalities has hardly changed. We haven’t seen a marked change in 25 years. It has to be addressed.

“I don’t think we will have succeeded if we don’t bring about a shift in the pattern of inequality.

“It’s about repositioning Birmingham as well as sharing in the successes. Birmingham has started to remodel itself, but not everyone in Birmingham has benefited.”

 

He paid tribute to former deputy council leader Paul Tilsley, a Liberal Democrat, for pushing ahead with the green agenda. But Coun Tilsley’s efforts were largely “under the radar”, did not go far enough and failed to come up with a comprehensive plan for delivering environmental improvements.

Sir Albert added: “There isn’t a view as to what this city should be like in five or 10 years as a green city of Europe. There’s no view about how this city might look as a smart city of Europe.”

Two commissions set up by Labour will report by the autumn on how to proceed with the green and smart agenda, and Sir Albert said he expected to challenge the private sector and academia to play a leading role in boosting Birmingham’s reputation.

The new council leader is deadly serious about devolving as many council services as possible to new district committees, even though he expects the policy to result in some tensions between the cabinet and the districts.

He said: “We didn’t make the progress we envisaged when we started devolution 12 years ago. The whole agenda didn’t move from where we left it in 2004.

“We have gone for a big bang approach. We want to see a culture shift. We want to see services delivered from the point of view of the local area rather than a homogenous perspective across the city. What’s required in Sutton Coldfield isn’t what’s required in Ladywood.

“Of course there will be tension but it is right there should be positive tension between the devolved executive and the central executive. This is about the central executive understanding that there is a devolution agenda which, in strategic terms, they have to take on board.”

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