Birmingham City Council to apply to raise council tax above government limit to balance its books

Council House in Birmingham Credit: PA Wire/PA Images

Birmingham City Council will apply for permission to raise council tax by more than 5% to help plug a predicted £300 million budget gap.

The authority issued a section 114 notice on 5 September, meaning it is essentially bankrupt, after it admitted it had an estimated £760 million equal pay liability which is believed to be growing by millions every month.

Documents published ahead of a council cabinet meeting on Tuesday (12 December) show the council is facing a £87.4 million overspend for 2023/24 and a budget gap of around £300 million by 2025/26.

Councillor John Cotton said the local authority should not ‘lose focus’ on its effort to save money Credit: Richard Vernalls/PA

The council will now apply for government permission to raise council tax by more than the 5% 'referendum limit' (the amount councils in England can put up the levy without consulting residents first) to help plug the gap.

In a report written before Tuesday’s meeting, the leader of the council, Councillor John Cotton, said: “The council is currently in a position where it is unable to set a lawfully balanced budget, and as such further consultation is now required with the Department of Levelling Up, Housing and Communities to explore additional Exceptional Financial Support to enable the setting of a balanced budget for 2024/25.”

Speaking at the meeting, Cllr Cotton said: “We face a budget gap of some £300 million by 2025/26.

"Like other councils across the country, we are facing the same rising demand for services, we are having to manage the increased costs of service delivery and issues like inflation.

“We are also having to address some specific local challenges, including the non-delivery of previous savings commitments.”

He added: “We want to see a wider transformation of the council, we want to see an end to duplication, we want to see a focus on efficiency and cost-cutting savings so we can deliver an organisation that is sleeker and focused on the delivery of key services for residents.

“It’s also clear that we will need to seek Exceptional Financial Support from the Government in order to bring the council’s budget back into balance.

“These are obviously very tough times, we have got some difficult and challenging decisions ahead of us in shaping the budget, but what we can’t do is lose our focus on stabilising the finances of this council.”

The exact size of the council tax hike has not yet been confirmed, but other authorities which have previously issued section 114 notices have increased council tax by up to 14.99%.

The Government increased the 'referendum limit' to 5% for authorities with social care duties in April, with many councils quickly applying the increase.

Council House in Birmingham Credit: Matthew Cooper/PA

Cllr Cotton also said in Tuesday’s meeting that as well as raising council tax, proposals to save £149.8 million for 2024/25 were presented to government commissioners on December 1, which included service reductions.

The commissioners, led by Max Caller, have tasked the council with providing a credible plan to plug the £300 million two-year budget gap by January 7, something they said was “achievable”.

But responding to Cllr Cotton’s report, they said a “huge” amount of work was still needed and that there was a lack of “any early budget work” to understand how the 2024/25 gap could be addressed.

They said: “There remains a huge amount of work to do to both identify robust savings and establish a savings delivery process that is credible.

“This will need to be undertaken at pace and with a step change in the level of organisational focus and grip.”

The Department for Levelling Up, Housing and Communities has been approached for comment.

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