Birmingham is set to be the latest council taken over by Government commissioners.
Birmingham City Council has become the latest local authorities to declare effective bankruptcy.
After a small uplift in recent years, the budget was generally still 10.2% below the amount available to councils in 2009/10. This is at a time when both demand for services and costs have risen significantly.
The amount that can be raised in council tax also varies significantly, with better off areas benefiting from higher housing growth generating more revenue than in disadvantaged areas which have greater demand for services. Thurrock, Woking and Slough have recently seen the value of investments plummeted as a result of market instability.Crucially, the Government has long-promised wholesale reform of the way councils are funded, but has failed to deliver after a number of false dawns on what is known as the “fair funding review”.
While some councils have suffered from failed investments, Birmingham City Council is one that has experienced the impact of failing to deal with equal pay requirements. This approach may enable councils to balance the books in the short term, but it creates a heightened sense of risk with structural deficits looming further down the line.The sharp rise in the number of councils declaring, and expecting to declare, effective bankruptcy poses a significant problem for the Government.
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