Birmingham, UK, to approve service cuts, tax hikes to avoid bankruptcy

Birmingham City Council revealed in November that it was unable to balance its books. (representative)

Councilors in Birmingham, Britain’s second-largest city, were poised on Tuesday to approve tax increases and deep cuts to public services, which could include cuts to arts funding and reductions in rubbish collection, as the city struggles to avoid bankruptcy.

Birmingham is the latest UK council to find itself in financial trouble due to the rising costs of services such as adult social care, compounded by decades of high inflation and falling incomes over the past two years.

Many councils also accuse the Westminster Conservative government of years of underfunding, which in turn accuses the Labor opposition administration of mismanagement.

The country’s 190 largest local authorities, which typically are responsible for services from waste collection to street lighting, have a collective budget deficit of $US5.2 billion ($6.6 billion), according to research last year by the BBC.

Birmingham City Council revealed in November that it was unable to balance its books.

It blamed “long-standing problems”, including the rollout of a new computer system, for an $87 million hole in its annual budget.

That triggered a lockdown on all spending except essential services, while it considers how to cut around £300m to stay afloat.

Proposed cost savings include fortnightly rather than weekly rubbish collections from 2025, the sale of 11 community centers and the removal of all arts funding.

The government has also given council approval to increase taxes on major local services by 10% this year and next.

Both sets of measures will be approved by councilors at a meeting on Tuesday.

The day after, local officials in Nottingham, England’s East Midlands, approved cuts to council work and services to plug a $53 million budget gap.

Croydon Council in south London declared itself effectively insolvent in 2022 due to a $130 million black hole in its budget.

Thurrock Council in Essex, east London, and Woking Borough Council, southwest of the capital, followed suit in the following months.

The not-for-profit Local Government Information Unit (LGIU) revealed in its annual report last week that one in 10 councils said they were at risk of being declared insolvent within the next year.

That number will rise to around half within the next five years, according to responses from England’s 128 councils.

“This report shows for the first time how widespread funding shortfalls are in councils,” LGIU chief executive Jonathan Carr-West wrote in the report.

“It is now impossible to deny that there is a structural finance problem,” he added, urging a reform of how local authorities are financed.

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