£760m debt may be a mirage
‘Accounting procedure’ could offer ray of light for beleaguered city council
THE huge equal pay sum of £760 million that forced Birmingham City Council into ‘bankruptcy’ is ‘not a real number’.
Instead it is an ‘accounting procedure’ unlikely to match the final bill, according to the man overseeing council affairs.
Council insiders say the eventual payout could now be as little as £250 million – nowhere near to the alarming sum listed in legal documents about the council’s financial implosion.
One document seen by the Post describes “a process of negotiation” under way that will ‘heavily discount’ the final bill.
But lead government commissioner Max Caller, sent in by minister Michael Gove to oversee council affairs, has urged councillors and others to ‘stop asking pointless questions’ about the potential number, nor to entertain those who are.
He described such enquiries as ‘esoteric’.
“The number will be the number until it’s replaced by a real number which will be the sum of all the claims and any other settlements, and that’s the only time it is worth worrying about it.
“Any other commentary is just pointless really,” Mr Caller told members of the beleaguered council’s cross-party coordinating committee.
That drew a sharp response afterwards from Cllr Paul Tilsley (Lib Dems, Sheldon).
He has been among those pressing for openness about how the equal pay figure was reached and, ultimately, how relevant it was, given it has been a major cause cited for the council’s financial meltdown.
Cuts to services, totalling more than £300million, more than 600 job losses and a massive sale of assets were all kickstarted by concerns about equal pay.
Cllr Tilsley said: “There is a narrative here of being told not to question figures set out by officers and contained
in formal documents, as doing so questions their professionalism. That is part of the reason, I would argue, that we have ended up here at all (in financial crisis).”
Senior councillors from all parties have said their concerns around council finances have been too quickly ‘shut down’ in the past.
Speculation about the validity of the £760m liability, and why it was released last June, have been rife.
Thousands of council owned properties and land are being sold off to help create a pot in readiness for payouts, as part of a ‘loan’ agreed with Government of up to £1.25 billion.
Most of it (more than £800m) is to be set aside for equal pay liabilities.
Attempts by councillors, unions and academics to interrogate the
number have been stonewalled repeatedly since it was first flagged in a press notice last June.
Among those who have pressed for answers about the equal pay issue are researchers from the Audit Reform Lab, a unit of audit and local government specialists based in Sheffield but with links to and a special interest in Birmingham’s affairs.
They believe the equal pay liability was used to mask other serious shortcomings and uncontrolled spending.
James Brackley, from the Lab, has requested an independent assurance statement on the equal pay liability, along with full disclosure of how the amount has been calculated and what audit work has been performed.
They have also asked for clarity about whether a new accounting rule introduced in 2020 has been a factor.
Former finance experts with intimate experience working at the council have also said it was a highly unusual move to suddenly give the equal pay issue such prominence based on a speculative situation.
The situation poses several questions.
Was the equal pay announcement part of a ploy to force the Labour leadership to sign up to a rapid job evaluation and grading plan that they had opposed?
Was it an attempt to protect officers from failures over the magnitude of the broken Oracle IT system, and to protect officers and members over unrealistic budget plans in prior years?
According to Mr Caller, only a future public inquiry will be able to answer these questions.
Cllr Tilsley added: “I am an elected councillor and it is my job to my constituents to oversee the governance of the city, and that includes asking questions that might be seen as irrelevant or ‘pointless’ by the leadership, officers and the commissioners.
“There are legitimate questions about why the decision was made to declare a financial crisis on the back of an equal pay liability. Asking questions about the potential liability gets to the very heart of why the council is in crisis.”
But Mr Caller again responded that ‘commentary’ and ‘questions’ about the equal pay figure should be ignored as it was a ‘waste of officer time’.
There is a narrative of being told not to question figures set out by officers, as doing so questions their professionalism Cllr Tilsley