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Birmingham 'could be bankrupt in 18 months'

MP Gisela Stuart warns city could go way of Detroit and calls for new system of leadership

Pic: Richard Maude Gisela Stuart MP
Gisela Stuart

Birmingham could be bankrupt in 18 months' time, an MP has warned.

Gisela Stuart (Lab Edgbaston) told the House of Commons the city could go the way of Detroit and warned Birmingham needed a new system of leadership in the form of a directly elected mayor, as well as direct access to funding, in order to secure its future.

City voters rejected the idea of a directly elected mayor in a referendum in 2012 but Mrs Stuart said holding the referendum was a mistake and a mayoral system should simply have been introduced.

Speaking in a debate attended by Local Government Secretary Eric Pickles, she said: "In 18 months' time, on the current trajectory, the city could go bankrupt. This is not just scary talk, it is the truth."

Birmingham City Council has cut spending by £375 million between 2011/12 to 2013/14 and has imposed cuts of £86 million for the current financial year.

But earlier this year, council leader Sir Albert Bore warned next year would be "the crunch point" when the city would be forced to cut spending further, even though any spending had already been reduced as much as possible

Speaking in March, he said: "In 2015/16, we are anticipating a further £207 million of cuts of which only £48 million is so far identified.

"In 2016/17, a further £81 million of cuts will be needed, of which only £28 million has been identified and in 2017/18 a further £72 million- almost all of which is still to be identified."

In 2012, Sir Albert said the council could go bankrupt due to a £757 million bill to compensate former female members of staff who were not paid at the same rate as men but were carrying out similar work.

He said he expected the Government to support the council's attempts to deal with the bill by borrowing against assets or selling the assets.

Other city leaders have expressed fears about bankruptcy. Liverpool mayor Joe Anderson has warned government cuts mean the city could be "bankrupt" by the end of 2016/17.

Birmingham City Council declined to respond to Mrs Stuart's claim.

She said cities were not funded properly and this was connected to the failure to reform the way they were led.

"We made having directly elected mayors the subject of a referendum, which was a big mistake. If we want to devolve power in England outside London, we need strategic directly elected mayors," she said.

"We need them to work on boundaries that are beyond the local authority boundaries.

"If we look at the city boundaries and at the NHS commissioning boundaries, the latter go by patient flows around the hospitals, which are not respecters of local authority boundaries."

Joseph Chamberlain, the mayor of Birmingham from 1873 to 1876, was a national figure but the same was not true of council leaders such as Sir Albert or Richard Lease, leader of Manchester City Council, she said.

Chamberlain "turned what was then one of the country's worst governed cities into one of the best in three years," she said.

"The key thing was that he was a local leader who gave up the town hall, with regret, to go to Westminster.

"He was said to have made the weather. How many civic leaders do we have these days who we can say are making the weather?

"We can say it of Ken Livingstone or Boris Johnson, but the names of Richard Leese and Albert Ball ought to be rolling off our tongues in the way that the names of cabinet ministers do. But they do not."

A result of lack of leadership was that major problems like unemployment were not fixed, she said.

"We are told that Deutsche Bank is coming to Birmingham and creating 1,000 new jobs, but I have talked to Network Rail in the context of Birmingham New Street and asked what has surprised those most involved in the five years of the New Street regeneration.

"I was told that it was the increase in regional commuting. We have a city with 10 constituencies, of which two are consistently in the top three of unemployment: Hodge Hill and Ladywood.

"We then create 1,000 jobs for Deutsche Bank in or on the edge of Ladywood and all that happens is that we bring in employment from Warwickshire, Solihull and Worcestershire. The problems building up in the city are not being addressed."

Mr Pickles said Mrs Stuart "spoke powerfully about Birmingham and Joseph Chamberlain" but insisted the city council should follow his example and take the initiative rather than waiting for central government to give it powers.

He said: "I cannot help believing that he would have laughed his socks off at her contribution and the idea that he would stand around and wait for the Government to grant some powers.

"He took the powers and I think that frightened this chamber enormously and led to a lot of the regulations that pushed down on local government.

"I think that the general power of competence and the city deals are the future and local government should grab that opportunity."

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