Birmingham could go bust: An interview with Gisela Stuart

The city needs to make savings of £300,000 a day, says the Labour MP
April 23, 2014

Birmingham is one of Britain's greatest cities, but it faces huge challenges.

Gisela Stuart, the Labour MP for Birmingham Edgbaston, says that there is a “danger that [the city] is on the brink of insolvency.” Birmingham council has to plug a funding gap of £822m and time is short. “If you look at the figures that Albert Bore [the leader of Birmingham Council] has done, the crunch year is 2016/17,” says Stuart.

“The kind of savings which, on the current trajectory, the city would have to make are utterly unrealistic. We would have to save £300,000 a day,” she says. Retrenchment on this scale would involve cutting deeply into the core services provided by the council.

The coalition government has taken aim at local government budgets. George Osborne has introduced cuts that, between 2011 and 2015, will reduce funding for councils by 28 per cent. In 2015-16, there will be a further 10 per cent squeeze. In the case of Birmingham, Britain’s second largest city, the consequences of this tightening are stark, and exacerbate pre-existing weaknesses.

Birmingham faces some particularly tough challenges. It’s a large city of around one million people, and as Stuart says, it is “the fastest growing city in Europe,” with 40 per cent of the population under the age of 25. The majority of the population growth has come in areas with the highest systemic unemployment rates. “Hodge Hill and Ladywood, as constituencies, are always among the top three in the unemployment figures in the country,” says Stuart.

Its budgetary problems have forced Birmingham into the “enormously painful decision” to sell off assets, including the National Exhibition Group of iconic venues.

Stuart argues that the present council leadership is strong. The job is a complex and at times unpopular one that requires the brokering of a city-wide consensus. The council leader “is doing his best to have an open and honest debate with the electorate,” she says.

Even before the 2008 crisis, Birmingham Council was facing a financial threat, as a group of former female employees launched legal proceedings claiming that they had been paid less than their male colleagues. “The city didn’t face up to that problem at the time,” says Stuart, “and rather than paying the dinner ladies the rates they should have been paid, it kept going through legal judgements combined with no-win no-fee lawyers. It means the city’s got a bill of up to £1bn.”

Demography also poses long-term problems. Health spending, notes Stuart, “is skewed to the over-60s... So if you’ve got an ageing population, you get higher funding. If you’ve got, like we have, a disproportionately young population, you keep losing out.”

Stuart thinks that these problems have been compounded by the current government’s insufficient embrace of regionalism. The regional development agencies set up under Labour to promote economic regeneration across the country gave a “structural overview of investments” made at a local level, she says. But the government took office and “abolished them and put in place local enterprise partnerships,” which Stuart says are too small, and cannot control the complex array of payments that flow into cities from central government.

“The perfect storm for cities like Birmingham is at every level,” says Stuart. The coalition government “thinks that cities reflect the national economy. That’s not true. Cities are the engine of the national economy. And if cities don’t thrive then the areas around them wont thrive.”

In 2013, the Prime Minister commissioned Michael Heseltine, the Conservative peer, to examine the problem of Birmingham. This resulted in the report, presented a year ago, “The Greater Birmingham Project: The Path to Local Growth,” in which he proposed a plan for drawing the greatest economic benefit from the “extraordinary opportunities and latent strengths,” of Birmingham and the surrounding area. His proposals recommended the devolution of further power to the local level, especially concerning oversight of spending powers.

“Heseltine [suggests] regional strategic mayors [and] greater devolution of powers,” says Stuart, “and he’s right.” There are some in the government who are receptive to Heseltine’s views, she says. “Greg Clark, the cities minister, does understand the nature of the problem—but he’s one voice among many.”