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Birmingham City Council announces the safe arrival of £13m airport share dividend

Birmingham City Council announces the safe arrival of £13m airport share dividend

🕔21.Jan 2014

Birmingham Labour councillors are in the almost unheard of position of discussing which public spending cuts to restore following a series of surprise upturns in the city council’s finances.

A controversial £125 million savings plan for 2014-15 looks like being scaled back to about £75 million after last minute changes to budget projections, including a £13 million windfall share dividend for the council from Birmingham Airport.

Council leader Sir Albert Bore told a Labour group meeting he discovered “a few weeks ago” that the local authority would be receiving £13 million from its airport shareholdings.

The payment reflects a reappraisal of the airport’s finances following completion of the runway extension, which is imminent. Birmingham and the six other West Midlands councils, which own almost half of the airport shares, agreed to sacrifice dividend payments to help fund the £33 million runway scheme, and are now set to be rewarded for their generosity.

The £13 million payment was described as a “windfall” by deputy council leader Ian Ward at a cabinet meeting. Just under half of the sum will be given to the city’s 10 district committees to stave off possible sports centre and library closures, and the remainder will be used to offset other cuts.

Chamberlain Files understands Sir Albert was quizzed by Labour councillors and asked to explain when he first knew about the £13 million dividend payment, since the figure did not feature in an extensive public consultation exercise about a £125 million council cuts package.

The possibility of a cash windfall from the airport was not raised by the council at any of the public meetings staged during the consultation period.

Details of the airport dividend are in the monthly revenue budget monitoring report dealing with the council’s finances up until the end of November 2013. But the first official confirmation of the surprise windfall did not come until the report was tabled seven weeks later at the January 20 cabinet meeting.

A council spokeswoman said: “The city council’s month eight monitoring report represents the earliest opportunity to report the income following the Airport Company’s approval to the additional dividend.”

Any debate about when the council first knew it would receive a cash lifeline from the airport may appear pedantic, but the absence of the figure could be used by anti-cuts protesters seeking to prove through a judicial review that the 2014-15 budget and consultation is flawed.

When he launched the consultation Sir Albert announced that the cuts package would not be as great in 2014-15 as originally feared, although he still expects to have to save almost £300 million in 2015-16 and to close down completely some non-statutory services.

Other changes to the 2014-15 budget include an assumption that interest rate do not rise and that there are no wage awards for council staff. Lower inflation and a better government grant settlement than originally envisaged helped bring the £125 million forecast down to £88 million.

But the actual savings figure should fall to £75 million following receipt of the airport share dividend.

The slimmed down cuts package represents the first reversal for Sir Albert’s Jaws of Doom graph, depicting the amount the council has to save between 2010-11 and 2017-18. The projected amount is £839 million according to the budget consultation booklet, but that figure will have fallen by at least £13 million thanks to the airport cash.

The arrival of the dividend could be used by Sir Albert to caution against selling the city’s ‘crown jewel’ assets such as the airport shareholding and the NEC Group. A final decision on major asset sales is likely to rest on whether a one-off lump sum payment to the council is preferable to smaller but regular dividend payments.

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