The Chamberlain News

Former council deputy leader calls for all party plan and more openness on budget

The saga of government intervention at Birmingham City Council saw a new development this week with the publication of an independent ‘Peer Review’ into the Labour leadership’s proposed budget for 2017-18. What does this report tell us about Birmingham’s progress, asks former council deputy leader Andy Howell?

Technically the review was commissioned by Birmingham City Council but in reality the demand for the report came from the Department of Communities and Local Government and their Birmingham Independent Improvement Panel. Peer Reviews are not inspection documents and as such are often written in ‘code’.

The Review Panel is made up of a number of senior local government officers, experts in local government finance and the Leader of Newcastle City Council (who is also the Labour lead on the Local Government Association). As the Chamberlain News has already reported the Review Team’s report is challenging. They clearly worry that Birmingham’s budget saving targets are too ambitious and question the Council’s capacity to deliver them.

It’s not all bad news though. The Report recognises the serious responses the council has made to its budgetary challenges and it paints a picture of an organisation that now has a better plan to deal with the significant challenges it faces. However, the 17-18 budget has to start by making up a whole series of ‘savings’ that were not achieved in the current year and which have led to a significant over-spend.

The Review Team take the view that the planned savings for 17-18 were “a reasonable and appropriate response to the financial challenge the council faces”, however, the concerns expressed by the Kerslake Review and re-iterated by the Improvement Panel led by John Crabtree are all too evident here. In laymen’s terms the Review Panel is not confident that Birmingham has either the capacity or the determination to deliver an effective budget both next year or over the medium term.

Within the Council itself two telling points are often made. Politicians often complain of being badly briefed, often far too late in the budget process. They point to the ‘constantly shifting sands’ of financial reporting, of data that is inconsistent and in which they have little confidence. Officers complain that few members appreciate or acknowledge the real challenge of the budget; they fear they do not have the ability to stick with the budget for one year let alone the five year programme that will be needed to properly stabilise the council.

The Review Team does acknowledge that the Cabinet has spent a great deal of time on the budget, but they also point out that such a late budget has offered backbenchers few opportunities to properly consider it and understand it. Yet the Council’s ability to deliver its budget depends on all elected members and not just the Cabinet itself.

The Panel flag up much heralded Future Operating Model for the Council as indicative of Birmingham’s challenges. The good news for the Council is that the Panel sees this model as being ‘perfectly reasonable and sensible’. The bad news is that the Panel doubt that this can be implemented effectively and in good time. They have a point.

Few Members seem to properly appreciate the changes that the Future Operating Model will bring about. This operational change programme will be hard hitting. We can expect to see a very significant flow of senior and middle ranking officers as tiers of management are stripped out. The Model will see many more services out-sourced, not only to social enterprises and the voluntary sector but almost certainly to the private sector as well. Many of these changes will be controversial and are are sure to be opposed energetically by both Trades Unions and Service User Groups.

Key to the Council’s strategy over the next year is the operation of a Performance and Transformation Board that will be jointly led by Deputy Leader of the Council and Chief Executive of the Council. Cynics are already pointing out that Deputy Leader has held the financial brief ever since Labour returned to power and has been running a ‘star chamber system’ that has failed to deliver. The Chief Executive is also now well established in is role. What’s new they will ask?

To be fair, Deputy Leader Ian Ward has been sharing the full scale of Birmingham’s cuts and job losses for several years now and I suspect he would be right in asking whether anyone is listening to him. To deliver these plans Councillors — especially those in the Labour Group — will have to be far more committed to these changes than they have been over recent years.

But this is not just a political mess. The Review Panel’s focus on Council Reserves is rather illuminating. In the current year the Council will probably use in excess of £30M of reserves to balance the budget. Next year the budget anticipates that a further £46M of reserves will be needed to be employed. These may seem to be extraordinary amounts of money and yet the Panel suggests that even after next year the remaining levels of reserves will remain at reasonable levels.

Across the public sector the use of high levels of reserves is often a sign of poor financial planning and management and a lack of confidence in financial reporting and delivery. Many outside of the Council, particularly those in the voluntary sector, will query why such high levels of reserves have been built up at the same time as social needs within the city have exploded.

Beyond 2018 the Council is envisaging that it won’t have to raid the reserves again yet the review Panel question this. They point to proposed cuts in Adult Social Care, Supporting People — particularly support to the Homeless and Children’s Services and effectively ask whether these can seriously be delivered.

To add insult to injury the Panel raise the thorny question of Service Birmingham, the mammoth outsourcing contract being delivered in partnership with Capita. The Panel is not confident that planned cuts to this contract can be achieved given the nature of the legal contracts that are in place. As the Future Operating Model will involve an even greater reliance on outsourced contracts, the ability to manage external contracts and budgets will become even more critical.

This report is effectively an interim report and the Panel clearly hope to have a lot of detail fleshed-out before they produce their final report in February. But on this reading it looks as if big doubts will remain about the ability of Birmingham to resolve its budget crisis.

It is time for there to be more political stability in the City, a greater all-party consensus about the commitment to the delivery of the Future Operating Model. Clearly this will be difficult to achieve given the fast approaching all-up elections in 2018. However, all parties in Birmingham have a clear responsibility for past decisions, many of which were taken during periods of Tory and Lib Dem coalition leadership. Think of the abortive attempt at a Single Status deal (which led to millions being paid out in equal pay claims) and the creation of Service Birmingham which many feel to have been a disaster.

There are many local government finance experts and commentators that will quietly tell you that Birmingham will need extra support from government if it is to finally get on top of its financial problems. This will be a tricky call for a Conservative Government; the confidence of this Review Team in Birmingham’s ability to deal with its budgeting could well have an impact not on future and further intervention but on future funding settlements.

Within the Council there has been a growing confidence of the Improvement Panel and the intervention process being round down in the first part of this year. Sadly, this looks remarkably over-optimistic. This Report — and other views from government — suggest that the improvement process and the work of the Improvement Panel is not over yet.

Some may see it as naive to call for Birmingham’s politicians to stand together in order to both deliver a stable budget and for them to work together to present a united front to government for more support, but the effectiveness of the council and its services to citizens — including the most vulnerable in our city — may rest on this. If John Clancy and his team are charting the right course then it is for all politicians to get on board and support him, but they will only do so if there is a greater commitment to working more openly with Members and other political parties.

We should hope the final report of the Review Team is more positive. However, it is worth considering the implications if Birmingham’s crisis is not averted. Continuing problems will see Birmingham unable to match the innovation and practice of other local authorities, not just the best but the best of the rest. Continue to fail and the gap between the best of local government and Birmingham will widen, to the detriment of citizens and service users. The prospects of further intervention and even structural change will be increased.

The challenge to all Birmingham’s politicians is to focus, consistently on financial performance over the medium term. It will not be easy but quick fixes for 2018 will only compound problems.