Financial Panic spreads in Birmingham City Council as all Capital expenditure frozen

Financial Panic spreads in Birmingham City Council as all Capital expenditure frozen

The following letter has been sent to all Constituency Chairs informing them on the freezing of all capital expenditure in the Council with immediate effect

12 December 2012

ALL DISTRICT AND WARD COMMITTEE CHAIRS

Dear Chair

Corporate Capital Resources Review

The Leader of the Council has recently spoken about the scale of the financial challenge the City Council is facing. A significant part of this challenge relates to financing Equal Pay back pay costs, the extent of which has grown again following a recent Supreme Court judgement.

The Council is presently in dialogue with the DCLG as to the funding of Equal Pay payments not covered by existing Capitalisation approvals received.  DCLG have made it clear that the City Council's corporate capital resources need to form part of the solution, so I have asked the Director of Finance to carry out a detailed review of the available capital resources in the Capital Programme. Information to support this review is currently being gathered.

Regrettably, I have had no choice but to ask that from Friday 7 December no new financial commitments are entered into at this time in relation to uncommitted capital projects which will require the use of corporate capital resources to complete. No financial commitments should also be entered into in relation to underspends on projects using corporate resources.

"Uncommitted capital projects" means capital projects which have not yet been substantially started, for example, the main contract has not been let. There is no intention to halt work on projects whose main works are on site. Assistant Directors of Finance and their teams will help services resolve uncertain cases.

"Corporate capital resources" comprise the City Council's own money. These include allocations of corporate resources such as the Capital Community Chest and any capital receipts which are budgeted to support particular projects.

I must emphasise that it is not proposed to stop Community Chest capital projects which were approved by ward committees prior to 7 December.  In addition, capital projects funded from Government or other capital grants, including un-ringfenced government grants, are unaffected.

Whilst the capital review is being carried out, this spending freeze in relation to uncommitted corporate resources will need to be strictly observed in order to comply with the expectations of DCLG. The only potential exception is likely to be in relation to health and safety or similar statutory requirements.

I am not happy to have to take these measures, but given the scale of the Council’s equal pay liabilities and the position adopted by DCLG, I have no choice. 

Yours sincerely

COUNCILLOR IAN WARD

DEPUTY LEADER OF THE COUNCIL