Birmingham City Council

Michael Gove Excerpts

Tuesday 19th September 2023 Commons Chamber

[The Secretary of State for Levelling Up, Housing and Communities (Michael Gove)]

With your permission, Mr Deputy Speaker, I would like to make a statement about Birmingham City Council.

Birmingham is a great city with a wonderful, diverse, creative and enterprising population. It has real economic, cultural and educational strengths. But Birmingham City Council has not served the citizens of that great city as it should have. For years now, the city has suffered as the council has failed to grip underperformance. Poor leadership, weak governance, woeful mismanagement of employee relations and ineffective service delivery have harmed the city. Senior leaders—both elected members and officers—have come and gone, but the one constant has been a failure to deliver for residents who deserve better. I believe strongly in local government, local decision making and devolution of power to local communities. But I also believe that when failures in local government occur, we must act. As we devolve more power to local government overall, we must demand sharper accountability. The need for action in Birmingham is pressing.

On 5 September the council’s chief financial officer issued a section 114 notice, which set out the full gravity of its financial situation. As a result, and as I will set out to the House, I am satisfied that Birmingham City Council is failing to comply with its best value duty. In line with the Local Government Act 1999, therefore, I can announce that I am today writing to the council to set out my proposal to intervene and to appoint commissioners, and that I intend to launch a local inquiry in due course. I do not take those decisions lightly, but it is imperative to protect the interests of the residents and taxpayers of Birmingham, and to provide ongoing assurance to the whole local government sector. Copies of the letter have been provided to the Vote Office, and will be deposited in the House of Commons Library and published on gov.uk.

It may be helpful to the House if I outline how we in Government arrived at this position. In 2014, the independent Kerslake report, commissioned after the “Trojan horse” investigation into a number of Birmingham schools, found that successive administrations had failed the city. It warned that the council lacked a clear vision, had failed to tackle deep-rooted problems such as the low level of skills, and was not doing enough to provide consistently good quality services. The report’s author, the late Lord Kerslake, also highlighted a culture of sweeping problems under the carpet or blaming them on others, rather than tackling them head on.

The problems Lord Kerslake identified have, unfortunately, endured. In April 2023, the Minister for Local Government, the Under-Secretary of State for Levelling Up, Housing and Communities, my hon. Friend the Member for North East Derbyshire (Lee Rowley) asked the then council leader, Councillor Ian Ward, to commission an independent governance review. He was prompted to act after governance and service delivery concerns were raised by three independent sources: the local government and social care ombudsman, the housing ombudsman, and the Department for Education’s commissioner for special educational needs and disability at the council. The scope of the review was then extended to include two further serious issues which subsequently came to light: the flawed implementation of a new financial ledger system, Oracle; and the council’s handling of its significant equal pay liabilities. The council’s response to both issues has caused concern, highlighting significant shortcomings in its governance arrangements, and in its ability to identify and resolve areas of weakness. Last month, my hon. Friend wrote again to the leader, seeking assurances about whether the council was compliant with its best value duty in relation to decisions on equal pay and Oracle. To date, there has been no response.

We understand that a number of factors led the chief financial officer of the council to issue the section 114 notice last Tuesday, as laid out in the report. These included concerns raised by the external auditors, Grant Thornton, around the provisions for equal pay in prior year accounts. The independent auditor’s assessment was that the revised estimated equal pay liability is likely to be more than £760 million, and there is a risk it could be much higher. That means, in turn, that the 2020-21 and 2021-22 accounts were materially mis-stated, and that the council did not have sufficient reserves to mitigate the cost of the liability due for those years. In addition to the acute financial position stemming from equal pay, the council is dealing with other difficulties. They include the costs of resolving the botched Oracle implementation, estimated at £100 million.

The residents and businesses of Birmingham deserve better. The intervention package I am proposing today is formed of two complementary parts. First, I propose to issue statutory directions to the council and appoint commissioners to exercise certain functions of the council as required. Secondly, I intend to launch a local inquiry to consider the more fundamental questions around how Birmingham got to this position and options for how it can become a sustainable council moving forward that secures best value for its residents.

I am proposing the transfer, to the commissioners, of the exercise of all functions associated with the council’s governance and scrutiny of strategic decision making, and all functions relating to senior appointments. As part of the proposed direction, the council would, under the oversight of the commissioners, prepare and agree an improvement plan within six months, which would set out the council’s own plans to make the necessary improvements to the whole council to return it to a sustainable financial footing. The commissioners will provide advice and challenge to the council across its operations and will have powers to make decisions directly should they deem that necessary. My hope is that the commissioners would not need to use all those powers. None the less, they must, in my view, have the necessary mandate to deliver the reforms that are required. The commissioners will give me, and I will in turn give the House, a progress report at regular intervals.

I judge that the scale and nature of the failings at the council, its precarious financial situation and its failure to provide sufficient assurance to Government that it is taking adequate action to address these issues are all highly concerning. I acknowledge that the council is working with the Local Government Association on its own proposals on improvement, and I have met the leader of the council to hear his plans, but in accordance with the legislation, I have now informed the council that I am minded to implement the package I set out today to protect the interests and services of the people of Birmingham, and have given the council five working days to make representations on the proposals I have set out today.

I am specifically minded to appoint Max Caller, an experienced local government professional and commissioner, to lead the intervention. I will also welcome representations from Members of this House and others who may wish to contribute their views. I thank Birmingham’s MPs for their engagement over the course of the last week, especially my hon. Friend the Member for Birmingham, Northfield (Gary Sambrook), who has been particularly closely engaged with the issue throughout.

It is important that we all get to the bottom of how we found ourselves in this position. That is why, as well as sending in commissioners, I am today making it clear that we need a local inquiry that can look at all the deep questions, including by assessing the council’s ongoing management of issues identified in the Kerslake review in 2014 and the subsequent non-statutory intervention. We will consider options for how Birmingham can improve in the future. I should make it clear that everything I am saying today is not a reflection on the many hard-working staff at Birmingham City Council who continue to deliver essential frontline services for Birmingham residents.

Birmingham is not the only council where we have seen significant local failure. There have been problems in recent times at Liverpool, Sandwell, Slough, Nottingham, Thurrock, Woking and Croydon. The Government have not hesitated to act where poor decision making and governance have been identified. The newly established Office for Local Government, our performance body for England, will have an important role to play in future where local authorities are identified as being at risk of potential failure. It will bring council leaders together with others in local government to explore problems in more detail.

Tougher scrutiny is vital when more decision making and budgets are passing from central Government into the hands of local politicians and officials. When local leaders fail, it is citizens who are let down—whose rubbish is not collected, whose libraries cannot open and whose vulnerable people are not adequately protected. Birmingham’s record is of ineffective, inefficient and unaccountable local government, despite our best efforts and significant support. That needs to change. I will take whatever steps are necessary to uphold the good name of local government and to protect the residents of that great city. I commend this statement to the House.

[Angela Rayner (Ashton-under-Lyne) (Lab)]

I thank the Secretary of State for the advance copy of his statement today. It has been a while since we faced each other: 804 days, to be exact. A lot has changed since then. We are on our third Prime Minister, our fourth Chancellor and, of course, our sixth different Minister for Housing. They have crashed the economy, families face the worst cost of living for a generation, and mortgage rates have increased nearly fivefold since our last meeting. But one thing has not changed: local government has been pushed to the brink. Birmingham is just the biggest, latest example.

This is a deeply worrying time for people in the city. The issues facing the council are difficult and complex, and administrations of all three major political parties have grappled with them in the years since they emerged. Since May, the new leadership in Birmingham have been working urgently on this issue and have been clear that they will take responsibility for tackling the problems facing their city, but they can only make that progress if the Secretary of State treats them as partners, and not as a political football.

I welcome the comments the Secretary of State has laid out today in regard to the action and support he will give Birmingham, but can he assure us that the commissioners will work with the city’s elected representatives and leadership to tackle these problems together? Is his Department considering a similar approach to other struggling councils? Will his officials be taking a deep dive into the areas he mentioned in his statement?

In Birmingham’s case, the Secretary of State mentioned the large equal pay settlement as the straw that broke the camel’s back, but he also told us that governance and service delivery concerns were raised by three independent sources: the local government and social ombudsman, the housing ombudsman and the Department for Education’s commissioner for special educational needs and disability. That came after Lord Kerslake’s review, which found that successive administrations had failed the city. Yet he provided no support until the section 114 notice. Why does it take that for the Government to take action on this scale?

Like the rest of the country, Birmingham is facing the shock of spiralling inflation and battling a cost of living crisis, but in the face of all of this, the Government stripped away its reserves. Can the Secretary of State confirm that that amounts to £1 billion taken from the pockets of local communities over the last decade? He surely cannot deny that Birmingham has experienced some of the most severe cuts of the last 13 years, and he must recall that it was this Prime Minister who boasted of changing the funding formulas to take money away from deprived urban areas. Now, faced with an eye-watering equal pay claim, with which the leadership are rightly dealing, Birmingham has been pushed over the edge.

As the Secretary of State admitted, this is by no means a single case. Local authorities across the country are struggling, and, after 13 years, he cannot seriously say that it is all their own fault. Perhaps he can confirm that only one council issued a section 114 notice before his party took office in 2010, and that since then eight councils have issued notices, with warnings that another 26 are at risk of bankruptcy over the next two years. Can he tell us why so many local authorities of all political stripes have already issued section 114 notices on his watch? This is not a one-off, so what work is his Department doing to support local authorities that are warning of financial distress now?

The truth is this crisis in local government has been caused by the Conservatives’ wrecking ball. With every swing, another local council is pushed to the brink and another local community falls over the edge. That is the difference between us. A Labour Government would oversee sustainable, long-term funding for councils, and we would work with local authorities and push power, wealth and opportunity out of Westminster. The Secretary of State finished his statement by talking about upholding the good name of local government. Surely we can all agree that central Government have real questions to answer. Will the Secretary of State finally grasp the nettle and take responsibility, or is his message to local councils today that this is just the start of more misery to come?

[Michael Gove]

It is a great pleasure to be reunited with the right hon. Lady; those 800 days apart seemed much longer. We have certain things in common—both of us have been trade union organisers in the past—but she has been much more successful in internal party elections than I have ever been, so I do have a lot to learn from her. Nevertheless, I must politely remind her that while in my statement I was, I hope, careful and scrupulous in making clear that responsibility goes back quite some time in Birmingham, and responsibility does need to be shared between elected members and officials, I did not mention anything specifically or explicitly party political, because I believe it is vital that we work together across parties and across political traditions to deal with this issue.

Given that the right hon. Lady did mention the party politics of this, I think it important for us to recognise that the intervention in Birmingham, and our interventions in Sandwell and Liverpool, have all been interventions in Labour-led local authorities in which comprehensive mismanagement extended back over years. It is simply not good enough to say that Birmingham has not received the support that it needed. Birmingham has a core spending power of £1,202.4 million. That is a 10.6% increase in the last year, and a 31.8% increase since 2015-16.

Labour local authorities have been supported with funding, and also supported with the help of West Midlands Combined Authority. There is a striking factor in the west midlands: why is it that Labour Sandwell and Birmingham are failing, while the Conservative leadership of Andy Street has seen the delivery of record investment and record house building? If people want to draw political lessons from what we have seen in Birmingham, the message is very clear: if you want effective and efficient local government, trust in Conservative leadership, particularly at a time when we need to recognise that a fundamental problem afflicting Birmingham’s finances is an equal-pay problem exacerbated by the actions of trade unions—trade unions which, in many cases, are funding Front-Bench spokesmen for the Labour party. It is vital that Labour politicians use their influence to ensure that we can work together to deal with the problems that that great city faces.

[James Morris (Halesowen and Rowley Regis) (Con)]

I welcome the statement—it is right that the Secretary of State is taking this decisive action in relation to commissioners so that we can get to the bottom of what has actually happened in Birmingham City Council—but can he give me some reassurance that neighbouring local authorities such as Dudley and Sandwell, and council tax payers, will not be picking up the cost of the failure of the Labour administration in Birmingham? Can he also reassure me that projects relating to transport infrastructure and employment creation and skills will not be put in jeopardy by the failures of that Labour administration?

--- Later in debate ---

[Michael Gove]

My hon. Friend makes an important point. Of course, there are real issues for Sandwell as a local authority, which is why we had to intervene there to deal with years of mismanagement, but it is also the case that council tax payers elsewhere in the west midlands must not be on the hook for failures that occurred in Birmingham. We will have some tough decisions to make. Central Government are prepared to extend additional financial support to the city, but our commissioners will, I am sure, be confronting the political leadership of Birmingham City Council with some necessarily difficult decisions, and I hope that we can take them in a constructive spirit together.

[Mr Clive Betts (Sheffield South East) (Lab)]

The Secretary of State gave a list of councils where section 114 notices had been served and commissioners had been brought in. Perhaps he can confirm that Thurrock, Woking and Northamptonshire are not Labour-controlled councils. He seemed to miss that bit out when he was justifying his attack on some councils on the basis of their being Labour-controlled.

No doubt there have been problems in all these councils, but does the Secretary of State accept there is some overarching responsibility for a Government who delivered austerity to councils—bigger cuts than in any other part of the public sector—and that while by and large local government has managed extremely well, some councils have gone over the edge? Does he also accept that other councils may now be facing the brink? He has an expert unit in his Department advising him. Can he tell us how many councils he thinks are now on the brink of section 114 notices, and what action he will take to help them in advance?

[Michael Gove]

I am always grateful to the Chairman of the Select Committee. I have already pointed out that in my statement I deliberately did not choose to make political points, but given that my wonderful shadow, the right hon. Member for Ashton-under-Lyne (Angela Rayner), did choose to insert some party political points, I thought it only appropriate for me to point out that Liverpool, Sandwell, Slough, Nottingham and Croydon had all been driven to the brink of bankruptcy by Labour leadership. It is important to give that context.

It is also important to say that while I will of course continue to fight for local government finance—and, at the last spending review, I secured the biggest increase for over a decade—it is nevertheless incumbent on elected leaders and officers to continue to deliver services efficiently. That is why our new Office for Local Government will hold councils effectively to account while also highlighting the best practice that is so widespread in local government, and which sees many councils continue to deliver high-quality services without getting into the sort of trouble that Birmingham has got into.

[Nicola Richards (West Bromwich East) (Con)]

My right hon. Friend will know that, unfortunately, my hon. Friend the Member for Birmingham, Northfield (Gary Sambrook) cannot be here today because of a family matter, but he—like me, and like so many others in Birmingham and the west midlands—wants to make sure that this review in Birmingham is different from some of the reviews that we have seen elsewhere so that we can finally figure out how Labour has repeatedly failed in Birmingham, in order to learn the lessons of the past but, most importantly, to protect local services for the future.

[Michael Gove]

I am grateful to my hon. Friend. We must deepen this inquiry. It is fair to say that it was a Conservative and Liberal Democrat administration that ran Birmingham until 2012, but over the last 11 years there has been a succession of Labour leaders. I do not for a moment move away from the fact that there were ways in which the Conservative-Liberal Democrat administration before 2012 was not performing as it should have been, but this deterioration—particularly when it comes to the issue of equal pay—has occurred on Labour’s watch.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

Can I ask two questions of the Secretary of State? First, he mentioned one person he is minded to appoint as commissioner. When will he tell us who else he has in mind? Secondly, will the Secretary of State’s commissioners’ powers to make decisions directly extend to making decisions to raise council tax and to sell off assets belonging to the people of Birmingham?

[Michael Gove]

I am glad that Max Caller has agreed to be lead commissioner, but in the next few days I want to hear directly from Birmingham’s MPs and other representatives about who they believe can act as effective commissioners alongside Max Caller. I am completely open to thoughts and suggestions from hon. Members and others about how we can build the most effective and coherent team. It has sadly been the case in the past with local authorities that have failed, such as Croydon and Slough, that we have needed both to increase council tax in certain circumstances and to dispose of assets, but it is too soon to say what the precise mix of interventions that may be required is. I want to do everything to protect Birmingham’s council tax payers and residents by making sure that services can continue.

[Saqib Bhatti (Meriden) (Con)]

I moved back to Birmingham after graduating; I chose to do so in 2007. I am a former president of the chamber of commerce and a former local enterprise partnership director—we have one of the most successful LEPs in the area—and to say that I am disappointed by what has gone on in Birmingham is an understatement, not least because it has had over a decade to get to grips with this issue. Does my right hon. Friend agree, though, that there are two stories in Birmingham? There is the story of the political failure that we are seeing at the council, but there is also the story of the youngest-ever city in Europe thriving, with the largest amount of start-ups outside London, a massive life sciences sector and an advanced manufacturing sector. This success is happening under the leadership of Andy Street. Will my right hon. Friend also confirm that my council, Solihull Council, which has projects with Birmingham, will remain unaffected by what is going on there?

[Michael Gove]

My hon. Friend has had a distinguished career in business and public service in the west midlands. It is right to say, as I sought to do at the beginning of my statement, that Birmingham as a city has so many strengths. We can be proud of its people and of its achievements economically, educationally and in so many other ways. The Commonwealth games showed Birmingham very much at its best. This is a specific problem that relates to the council. It requires focused action, and the support of the West Midlands Combined Authority, of Andy Street and of others will be vital in resolving this situation. There should be no adverse impact on residents in Solihull, and I will continue to work with my hon. Friend and other representatives of Solihull to ensure that that local authority continues to get the support it deserves.

[Jess Phillips (Birmingham, Yardley) (Lab)]

Obviously, this is not a situation that anyone would want to be in. I want to understand exactly how the commissioners will work. While everyone is making party political points, it is actually the people of Birmingham who vote for the council and who have put those people in place. Will the citizens of the city get any intervention in this process? How are their feelings going to be heard, or are they just going to have things done to them by people who, let’s face it, do not live in Birmingham or know what the city is like? I do not know this fella. I believe he worked in Hackney. He does not live in Birmingham. He does not know anything about what the city is like. And the Secretary of State’s praise for Andy Street makes me think that he has never tried to get on the tram in Digbeth. We cannot just have a steamrollering in the city. There has to be some level of accountability also for the commissioners, and I wonder what system that will work on. I have to ask the Secretary of State: what is it about the last 10 years that means he can reel off a list of councils including Thurrock, Northamptonshire and Woking? I believe that his own council is not in cracking shape. What is it about the last 10 years that has meant they have all shown cracks in the roof?

[Michael Gove]

There are several important points there. I have never taken a tram in Digbeth, but I do know that, thanks to Andy Street, there is significant additional investment in Digbeth and that the BBC is moving there. It is thanks to Andy Street that we are seeing business and culture flourishing in the west midlands. Max Caller is a uniquely experienced figure in local government. In Slough, he managed to deal with many of the defects that had occurred under—I am afraid—a Labour administration. Having talked to the hon. Lady and other Birmingham MPs, I am very open to them as Birmingham’s elected representatives co-operating with me to help identify who should join Max as a commissioner. The explicit reason that I am minded to act in this way, and that I have announced only one name, is to get the maximum possible consensus and buy-in for a strong team that can take the steps required. What has happened over the last 10 years? I am afraid we have to look at individual councils and the decision-making within them, and to recognise that there are well-run councils. I shall not name them here, but there are even one or two well-run Labour councils. But it is important to recognise that this is about the quality of local leadership, which, as we devolve more power down, has to rise to the challenge.

[Jane Stevenson (Wolverhampton North East) (Con)]

Like many colleagues in the west midlands, I seek reassurance that my constituents in Wolverhampton will not be impacted by a knock-on effect through the West Midlands Combined Authority. Does my right hon. Friend agree that hard-working people pay their council tax to get the essentials done, and that Birmingham, which knew it was in financial trouble, spending £1.2 million on trade union facility time last year seems an expense too far for hard-working people?

[Michael Gove]

I thank my hon. Friend for doing such a fantastic job for Wolverhampton. Even though I may not always agree with everything that Wolverhampton Council has done, it has had some distinguished Labour figures leading it in the past. More broadly, there has been a consistent failure to deal effectively with employee relations and trade union issues in Birmingham. We talk about equal pay, and of course equal pay matters, but what we have seen is a failure to effectively confront this liability early enough and a failure to deal fairly and robustly with trade unions.

[Mrs Paulette Hamilton (Birmingham, Erdington) (Lab)]

Birmingham is the eighth local authority to declare a section 114 notice since the Tories took power, causing huge concerns to my residents in Erdington, Kingstanding and Castle Vale. Across the UK, councils are struggling with rising prices and limited budgets, and most are being forced to make even deeper cuts next year. Can the Secretary of State accept that local leaders need certainty about their budgets and reassure the House today that every local council will be properly funded by central Government?

[Michael Gove]

Absolutely; we do ensure that every council is appropriately funded. I know—[Interruption.] I know that the hon. Lady served with distinction on Birmingham City Council, so I would exempt her from any criticism, but I do not exempt from criticism others who have served and continue to serve on Birmingham City Council. If we look at each of these specific local authorities, we see failures that require to be acknowledged—failures that even the current Labour leader has been good enough to acknowledge. That is why we need to work together and why this intervention is required.

[Andy Carter (Warrington South) (Con)]

The sad case of Birmingham City Council will worry my constituents. As the Secretary of State knows, Warrington Borough Council—a Labour-run council—has borrowings of almost £2 billion, which is 10 times its core spending power. My constituents and I worry about the governance of Warrington Borough Council and about the return on investments that have been made by the council. I am also deeply worried that councillors in Warrington do not understand the decisions they have taken and the exposure they have put my constituents under. Each constituent is now in debt to the tune of £10,000 because of those decisions. Can my right hon. Friend set out the steps his Department is taking to prevent another collapse at a Labour-run council, given that that could occur in Warrington next?

[Michael Gove]

I know that the Minister for Local Government, the Under-Secretary of State for Levelling Up, Housing and Communities, my hon. Friend the Member for North East Derbyshire (Lee Rowley), has been paying close attention to what has been happening in Warrington, and we will report back to my hon. Friend the Member for Warrington South (Andy Carter) and to the House on that. He is absolutely right to raise those concerns as there is more work that we require to do to satisfy ourselves about the fundamental financial health of Warrington.

[Mr Khalid Mahmood (Birmingham, Perry Barr) (Lab)]

The Secretary of State has rightly mentioned the Bob Kerslake report of 2014, a key finding of which was that the role of officers in Birmingham had subdued the role of elected members. John Cotton, the current council leader, has rightly highlighted the accounting and equal pay issues—he wants to make a difference. To resolve the issue with the officers, will the Secretary of State look to bring back the district auditor function, so we can be much clearer about the finances of local authorities?

[Michael Gove]

I am grateful to the hon. Gentleman for the very constructive approach he has always taken to dealing with local government and education issues. Yes, the Kerslake report identified a number of weaknesses, including at officer level and, yes, it is also the case that the relatively new leader of Birmingham City Council, John Cotton, has been honest about the need for improvement.

It is also the case, as the hon. Gentleman rightly points out, that we need to improve the audit function within local government overall. The Redmond report and others have pointed to the need to do so, and I believe that the new Office for Local Government will provide an even more rigorous early-warning system, if things are likely to go wrong, as well as—this is equally important—celebrating those local authorities, of all political colours, that are doing a good job so we can learn from them.

[Jackie Doyle-Price (Thurrock) (Con)]

The problems we face in Thurrock have emerged over the past 10 years, during a decade in which Thurrock has been dominated by three-party politics and a succession of minority administrations in which the UK Independence party held the balance of power. Being brutally frank, it was impossible to make financial cuts or to increase council tax, which has led us to our current situation.

In the light of the best value inspection, which found that the position had been exacerbated by annual elections and constant electioneering, will my right hon. Friend consider whether those lessons need to be read across local government? I remind him that, going back as far as 2019, previous Ministers, the Chartered Institute of Public Finance and Accountancy and the National Audit Office all warned Thurrock of the recklessness of its policy, yet councillors and officers failed to act. Do we need to consider statutory powers for a sanction in those circumstances?

[Michael Gove]

My hon. Friend makes a series of very helpful points, and she is right. Obviously, it is not my role or responsibility at this time to interfere in the calendar of elections that local government has enjoyed, acquired or inherited over the years, but I agree that, wherever possible, we should move away from annual elections. Indeed, the work to change the electoral geography and timings in Liverpool has been helpful. She is also right that the particular political dynamic in Thurrock created difficulties, and how we hold people to account in future needs to be reviewed.

My hon. Friend has been a consistent voice in challenging underperformance at Thurrock Council, and a brave voice in attempting to face down populism in her constituency, in order to do the very best for her constituents.

[Preet Kaur Gill (Birmingham, Edgbaston) (Lab/Co-op)]

The situation facing Birmingham City Council is very serious, and those responsible should be held to account. None the less, we know Birmingham is not unique. Many councils across the country, as we have heard, are entering section 114 territory. According to reports, the Secretary of State’s local council in Surrey Heath could go bankrupt within two years. What assessment has he made of the financial situation facing councils and of the impact of the £1 billion stripped from Birmingham City Council’s budget by the Government?

[Michael Gove]

The overall health of local government matters hugely, and the financial health of local government matters hugely. That is why we are bringing forward the new Office for Local Government. I think the hon. Lady and I will have to agree to disagree on the root cause of the problem in Birmingham. As I said earlier, Birmingham’s core spending power has increased significantly, and other local authorities that have not seen their core spending power increase by the same amount are managing their finances effectively, but I hope we can work together to ensure that, wherever responsibility has lain in the past—we may disagree on that—we can serve the people of Edgbaston and all of Birmingham better in future.

[Scott Benton (Blackpool South) (Ind)]

Labour-run Blackpool Council currently has a budget deficit of more than £23 million, which is one of the largest in the country compared with its revenue budget. Despite this, the council continues to fritter away taxpayers’ money, not least in spending £174,000 on six trees and in giving councillors a pay rise. To ensure its financial position does not deteriorate further, will the Secretary of State join me in urging the council to get the basics right, to end its pursuit of ideologically driven projects that are not supported by residents and to end all wasteful spending immediately?

[Michael Gove]

I love Blackpool and I love trees, but £174,000 for six trees is £29,000 a tree. Some trees they must have in Blackpool.

More seriously, the local authority faces challenges, but Blackpool’s two Members have been very successful in securing additional central Government expenditure to help to regenerate the centre of Blackpool and to secure new investment. Whatever views one might take of Blackpool Council—and it does seem as if it is paying slightly more for its trees than it could have paid in most garden centres—central Government have nevertheless shown how partnership and levelling up can secure real change.

[Liam Byrne (Birmingham, Hodge Hill) (Lab)]

I am grateful to the Secretary of State for the offer to work together, and that offer has been welcomed by Councillor John Cotton this afternoon.

Can the Secretary of State tell us whether we can find a way to have a conversation about fair funding? He is a student of Tory leadership campaigns and, like us, he probably winced when he heard the Prime Minister say to one campaign meeting:

“we inherited a bunch of formulas from the Labour Party that shoved all the funding into deprived urban areas…that needed to be undone. I started the work of undoing that.”

The truth is that richer councils have taken cuts of about £44 per head since 2010, whereas Birmingham City Council has taken cuts of 14 times that amount. There is a conversation to be had about funding, and I am grateful that the Secretary of State is considering one way to fix it, by creating a levelling-up zone and investment zones in east Birmingham, on land between the two High Speed 2 stations.

Can the Secretary of State confirm that those plans will still go ahead? Has he considered creating a development corporation in east Birmingham, for which I have argued for a long time, to lever in significantly larger amounts of money? Can we have a conversation about how we support the combined authority, too? As he will know, Andy Street’s budget faces a gap of £29 million next year, rising to £50 million in a couple of years’ time, and currently there is a £1.1 billion black hole between the investment programme and the funds available to pay for it.

[Michael Gove]

I am grateful to the right hon. Gentleman for his very thoughtful question. Although we might disagree politically and have different reflections on what may have been said in the past, he is absolutely right that we need to explore a development corporation and that east Birmingham, in particular, needs additional investment. He is also right that we need to work with the West Midlands Combined Authority. The recent trailblazer devolution deal gave significant additional support to the West Midlands Combined Authority and the Mayor, but we keep what is required under constant review.

The right hon. Gentleman is also right that Birmingham’s economic health powers the whole west midlands and is vital to our overall success as a nation, which is why I want to make sure that we get back to strong leadership and effective governance in Birmingham.

[Mr Deputy Speaker (Mr Nigel Evans)]

I call the Chair of the Public Accounts Committee.

[Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

I welcome the appointment of Max Caller, who has a strong track record of making these difficult decisions and helping councils to turn around, but the Secretary of State will know that task and finish was a big part of what happened in Birmingham. Does he have oversight of which other councils are still doing that? Nearly 30 years ago, at Islington Council, we were looking at those issues and tackling them.

The big issue here—the elephant in the room—is local audit. Some 12% of audit opinions for the 2021-22 financial year have come in, even with the extended deadline. The permanent secretary and the National Audit Office have indicated that we need to focus on the current year and to forget previous years, but these canaries in the mine, these warning signs, were never heard because of the dire state of local audit. This has all been on his Government’s watch. Can he give us any reassurance that he really has a plan to get local audit back on track?

[Michael Gove]

First, I thank the hon. Lady for her kind words about Max Caller. He is a first-class professional, and I know he will do an excellent job with the other commissioners. Secondly, I think it is fair to say—I do not want to make a party political point—that the local audit situation requires both investment and leadership. One of the first things I sought to do when I arrived in the Department was to ensure that the Office for Local Government can play a system leadership role in helping to reform and improve that process. I completely agree with the hon. Lady on that.

The hon. Lady’s central point was about task and finish, which some Members may think sounds like a good thing. A task and finish group is a team that sets out to resolve a problem and dissolves itself when the problem is finished. It seems to be the model of what we should have in administration: not a permanent bureaucracy, but a taskforce. However, task and finish in Birmingham, and indeed in some other local authorities, has basically meant the binmen—the scaffies, as we would say in Scotland—knocking off early as soon as they had claimed that they had finished their task and yet claiming for their full working day. Again, it is not an effective way to run any public service.

[Wera Hobhouse (Bath) (LD)]

Councils across the country are struggling under severe financial constraint and there is no doubt that local government is badly underfunded. However, I want to commend my Bath & North East Somerset Council for having shown great prudence in order to rebuild its finances, and I hope the Secretary of State will join me in praising it. The reform of the audit system has been mentioned, but may I ask him: what timeline can we expect for a reform of that system? When does he think the backlog of unpublished opinions will be cleared?

[Michael Gove]

I am grateful to the hon. Lady for that and I had the great privilege of visiting Bath recently to look at a housing development. Just as some Labour councils are good, I believe there are one or two Liberal Democrat councils that are good, although I certainly shall not be naming them at this Dispatch Box now. More broadly, we are taking steps to deal with the audit situation she mentions and my hon. Friend the local government Minister can brief her in detail, should she wish, about that situation.

[Rachel Hopkins (Luton South) (Lab)]

The Secretary of State mentioned core spending power, so it is important to reflect on the first 10 years of this Conservative Government, when 60p in every pound was stripped away from local authorities. The Government then forced councils to rely on council tax as central Government funding was reduced. Places such as Birmingham and Luton can raise much less from council tax, because of their smaller housing stock, than wealthier areas, which have bigger houses in higher council tax bands. Places such as Birmingham and Luton therefore lose out every year. Was his policy just a result of incompetence or is it part of the Prime Minister’s stated aim to take funding from deprived urban areas and give it to wealthier towns?

[Michael Gove]

I do not know how it is possible to sustain an argument that we are taking funding from deprived areas when one looks at the levelling-up partnerships we have in Hull, Sandwell, Blackpool, Blyth, Worksop—[Interruption.] A tiny amount? Tell that also to the people in Middlesbrough, Redcar and Cleveland, who have benefited from strong Conservative leadership and investment. Tell it to the people in Workington, Walsall and Willenhall. All of them have benefited directly from the levelling-up funding that this Government have secured. Were there tough times in the first couple of years after 2010? Yes. Why were there tough times? It was because Labour had left us in a situation where there was no money left. I am afraid that the lesson of Labour in central Government is that it always leaves office with unemployment higher than when it entered and with the public finances devastated.

[Mr Deputy Speaker (Mr Nigel Evans)]

I thank the Secretary of State for his statement and for responding to the questions, particularly those from the local Members.