Birmingham City Council Struggles to Cover £12.5 Million Gap After Tax Decision

Birmingham council planned a bigger tax increase, wanting to raise council tax by 9.99 percent. The government only allowed a 7.5 percent rise. This left a £12.5 million hole in their budget, which was almost ready to publish.

The council needs to fix this funding gap quickly and are asking the government for extra money, under an existing support agreement. If the government denies this request, the budget will be illegal.

Council leader John Cotton downplayed the issue, claiming the lower rise was agreed upon and that he didn’t choose the 9.99 percent figure. He also denied being surprised by the decision but wouldn’t say when he found out.

However, others inside the council disagree, stating the news was unexpected. The budget’s release got delayed because of it.

Angela Rayner announced the tax decision, saying six councils could raise taxes above five percent. She mentioned balancing taxpayer interests and that they didn’t approve every request fully.

Birmingham’s 9.99 percent rise would have made £50 million, but the 7.49 percent rise means £12.5 million less. The council expected the higher rise until recently and were still pushing for it in early January.

Cotton claimed past talks led to this agreement and blamed a previous government for pushing a high tax. He said they wanted to punish Birmingham residents.

Cotton avoided saying when he learned the news, mentioning ongoing discussions with ministers. He also stated he wouldn’t comment on these talks.

He denied being caught off guard by Rayner’s announcement, saying the tax decision wasn’t final earlier. He claimed a better deal came before Christmas and allowed budget changes to help vulnerable people.

Cotton denied a last-minute scramble to fix the budget. He said they discussed framing the budget properly to lessen the impact of cuts.

He repeated that the prior government set high tax assumptions and said the current situation changed under the new government. Discussions about the council’s progress are ongoing.

He wants to avoid impacting residents and services too much. The council will use existing financial support, having a £100 million contingency fund, part of a larger agreement. They can now use it to balance the budget.

The council officially asked the government for £12.5 million, needing approval for their budget to be legal. The council will meet soon to discuss the budget.

The support deal helps settle debts and fund changes, including a £100 million safety net. They must repay this money by selling assets later.