In a significant move to address Birmingham City Council’s financial challenges, the Minister for Local Government and English Devolution, Jim McMahon OBE MP, has announced the government’s intention to provide Exceptional Financial Support for the council. The support includes a potential capitalisation direction of up to £180 million for the 2025-26 financial year, alongside a revision of the previously agreed £685 million support for 2024-25 down to £490 million.
The decision comes in response to Birmingham City Council’s request for financial assistance, submitted on 19 December 2024, as the council faces unmanageable financial pressures. The government has acknowledged the fragility in the local government finance system and has committed to supporting councils in exceptional circumstances to ensure the continued delivery of essential services, particularly for the most vulnerable residents.
In a letter addressed to Councillor John Cotton, Leader of Birmingham City Council, Minister McMahon emphasized that the approval of the financial support is contingent upon the council providing assurance of its financial position and demonstrating ongoing efforts to improve its financial stability. The council will be required to deliver on proposed savings, rebuild its capacity, and ensure clear lines of accountability within its leadership.
The government has also outlined potential conditions for the capitalisation directions, including restrictions on when expenditure can be capitalised and requirements for the council to make progress on its Improvement and Recovery Plan, as assessed by the Best Value Commissioners.
Minister McMahon reiterated the importance of protecting community heritage assets, urging the council to avoid the disposal of such assets where possible to maintain public ownership of locally significant sites.
The government will continue to work closely with Birmingham City Council to finalize the details of the financial support and ensure that the council can return to a sustainable financial footing. Officials from the Ministry of Housing, Communities & Local Government will engage with council officers in the coming weeks to discuss the final amounts of support required for previous financial years.
This announcement marks a crucial step in the government’s efforts to stabilize local government finances and ensure the continued provision of vital services to residents across Birmingham.
