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Three years – finance and culture challenges remain

Three years – finance and culture challenges remain

🕔08.Mar 2018

Reading the latest letter to Sajid Javid, this time jointly from Panel chair John Crabtree and Council leader Ian Ward, it would be easy to forget that more than three years have passed since that withering assessment of the Council’s governance.

The background notes to the press release accompanying the letter to the Secretary of State informing him that the Council and Panel wish to “collaborate” helpfully remind us the Kerslake Review was published in December 2014 with the Panel established in the following month.

Improvement Panel and Council to join forces

Whilst there is little detail in the latest letter, it is clear that the two fundamental issues highlighted in the Kerslake Review stubbornly remain – financial management and organisational culture, writes Kevin Johnson.

Kerslake’s withering attack on Birmingham council: ‘Lack of vision, paternalistic and poor decision making’

The letter is somewhat of a surprise for two reasons.

Chamberlain Files understands that a draft version was being worked on before Christmas. It was held over as Cllr Ward settled into office with his own Cabinet and a new council chief executive appointed. But at least two more months have sailed by.

Mr Crabtree and Cllr Ward are seeking a more “collaborative” approach. You may have hoped the Council had been collaborating with the Panel for the last three years.

Along the way, of course, leaders and chief executives have come and gone. Mark Rogers, the council’s last permanent chief executive, left the council just over a year ago. We know this because the man himself mentioned the anniversary when we bumped into him last week.

Mr Rogers lost his job at the hands of Cllr Clancy. Months later, he was too was out of office – having himself succeeded Cllr Bore upon his failure to grip reform – after the disastrous handling of the waste management dispute. That battle with Unite probably also put paid to any chance of interim chief executive Stella Manzie wanting the job on a permanent basis.

The aim of disbanding the improvement panel became something of an unhealthy obsession for John Clancy. Mr Crabtree and his colleagues did indeed step back, only to see the Council not make sufficient progress on the budget and become entangled in a costly industrial dispute.

Improvement Panel to remain following ‘serious setback’

The new “collaborative” approach is likely to be a reflection of the Panel’s exhaustion and the approach of the latest council leader and incoming CEO.

After three years, several high level casualties and still much work to be done, where can the Panel go? It is stuck between recommending the Secretary of State send in commissioners to run the council or disbanding itself on the basis there is nothing more to improve.

Neither are practicable or politically palatable right now.

The Panel must be confident, or at least hopeful, in the new regime. It had the opportunity to meet the candidates for chief executive, but not to interview or select. Members, including the formidable vice chair Frances Done, might be making more progress with Cllr Ward and Ms Manzie, in particular, than with their predecessors.

As well as highlighting personnel changes and the Commonwealth Games success, the joint letter also points to the development of a new community cohesion strategy and building a more confident and integrated partnership model.

Dawn Baxendale starts as the Council’s latest CEO next month. Given her track record in local government to date, as well as at the European Commission, it is unlikely she will have experienced anything like the financial challenges or political landscape she will find in Birmingham.

Her experience in regeneration will come in useful in a city that is constantly developing and which faces the mammoth task of ensuring the infrastructure is in place for the Commonwealth Games in 2022 and the arrival of HS2 in 2026.

But, the principal problems underlined by Lord (then Sir Bob) Kerslake over three years ago were not about Birmingham’s appetite for regeneration. Economy Director Waheed Nazir will probably also believe he has business fully in hand, thank you very much.

Birmingham city council’s budgetary problems remain stark. Perhaps more to the point, local government’s financial predicament is worsening.

The Council’s budget for 2018/19 was passed earlier this month. It features a 3.99% increase in Council Tax, including 1% through the Social Care Precept. It would have been 1% higher, but the Labour administration changed its mind following public consultation.

It also means that it can include a Social Care Precept of 2% in next year’s budget, without triggering a referendum in either year.

Labour councils also forced the Mayor, Andy Street, to drop his proposal to fund the Mayoral office through an additional Council Tax precept.

Council Tax for a Band D property in 2018/19 will be £1,315.22 for city council services, an increase of £50.46 per year.

The new budget and Council Tax payments start next month – elections follow a month later.

Opposition leader Cllr Alden suggests tough decisions before elections are avoided by Labour, meaning even tougher ones have to be made afterwards to balance overspends.

The main newsline from this budget was the removal of charges for children’s funerals.

Consultation on the latest budget highlighted that since 2010 the Council has had to make cuts of over £642m. Meanwhile, the Local Government Association (LGA) has identified a £16bn reduction in core funding from central to local government between 2010 and 2020.

Changes in mechanisms such as the ‘fair funding’ calculation by the government have created a differential geography of cuts, according to the Labour council, and Birmingham has been subject to greater funding reductions than comparable local authorities over this period.

Along with other West Midlands councils, Birmingham will continue to pilot a new system of 100% local retention of business rates. The Council forecasts income from business rates will grow by £56m over the four year pilot period.

However, £40m of income during that time from Business Rates growth will be set aside in a contingency reserve in order to provide a back-up plan in case there is a shortfall in funding for the Commonwealth Games 2022.

The Future Operating Model, a new way of running the council triumphantly introduced under past leadership and management, has not been delivering at scale and is unlikely to anytime soon. Stella Manzie tore up the last version almost on day one of her tenure. Dawn Baxendale is likely to have to think again too.

Birmingham’s problems are stark, not least as it is the biggest local authority and has some of the most deprived wards in Europe.

The Conservative Government is not just under pressure from Labour Councils, but from their own councillors. Cllr Ward was among many to suggest that if Conservative-led Northamptonshire was effectively running out of money, it was surely time to think again.

A National Audit Office report published this morning said the financial health of councils across England was becoming worse and quick fixes like council tax hikes and emergency cash injections were not helping.

The watchdog warned that one in ten authorities could run out of savings in three years if they keep being forced to plough reserves into the struggling social care sector. It also said councils could be forced to cut so many services in the face of spending restrictions that they end up offering few services apart from social care which will continue to experience increasing demand given demographic trends.

Respected think tank Centre for Cities has suggested three ideas to help make the local government system stable and sustainable:

  • Revalue and devolve council tax
  • Reform the business rates system to make it more responsive to local economic conditions
  • Pooling finance at city region level.

One of Birmingham’s many challenges is to build enough homes to keep up with growth. Cllr Ward is among many to be exercised by the Government’s housing policies and its failure to follow up speeches with action.

Earlier this week the Prime Minister and Housing Secretary turned their fire on both councils and developers for not building enough homes in good time.

The backlash has been fierce, including from the Conservative chair of the LGA. Lord Porter said:

It is completely wrong…to suggest the country’s failure to build the housing it desperately needs is down to councils. The threat of stripping councils of their rights to decide where homes are built is unhelpful and misguided.

Ultimately, the private sector will never build enough of the homes the country needs on its own. The Government must back the widespread calls, including from the Treasury Select Committee, for council borrowing and investment freedoms to spark a renaissance in house building by local government.

The hope must be that a council elected for a four year term with a good working majority will be able to make bolder and faster progress on reform. But it is highly unlikely to be able to do that without more freedoms and resources from Government.

In the meantime, we face a Council election which can probably be characterised by Labour blaming the Conservatives for austerity and propagating fake news and the Tories slamming the current administration for their record on waste management and a lack of ambition.

Vote early and vote often….

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