A black hole at the centre of Birmingham City Council’s finances has hit almost £60 million, raising fears that services and thousands of jobs will have to be sacrificed in order to get spending back under control.
City treasurers are predicting a £14 million budget overspend this year, but the true position is far worse because council leaders have hijacked £43 million from reserves in a failed attempt to plug the gap.
If cost-cutting plans do not work, and efficiency savings are already running £17 million short of target this year, the local authority will start the next financial year deep in the red.
Most of the problems are confined to adults and children’s social services, where staff shortages have resulted in a £5.3 million overspend on hiring expensive agency staff to provide social work cover. Officials have reacted by capping the hours agency staff are allowed to work.
Budgets for helping adults with learning disabilities are £10 million in the red, while older people’s services are overspent by £9 million.
Fees from seven municipal golf courses are likely to be about £1 million less than predicted, while car park income is also down.
The council’s Tory-Liberal Democrat leadership blames the crisis on increasing demand for social services plus the impact of the recession.
Officials have been ordered to limit spending to “essential activity” only.
Paul Dransfield, Corporate Director of Resources, said: “The council is committed to being open about these pressures.
“Every effort is being made to cut our projected overspend and work will continue all year to put in place remedial actions to balance the budget.”
Opposition Labour group leader Sir Albert Bore accused the council of attempting to hide the true extent of the “dire” financial position.
Sir Albert (Lab Ladywood) added: “Horrendous cuts in services and job losses are inevitable if this council does not get things under control.
“The extent of the crisis facing Birmingham is becoming clear.”
