Birmingham City Council Declares Bankruptcy: Implications for Local Services


On September 5th, Birmingham City Council, the biggest local government in Europe, issued a 114 notice, officially declaring itself bankrupt. A survey asking “WHICH OF the following do you value the most?” distributed to Woking residents by the Woking council in July. The respondents were able to choose only three local services out of a total of twelve.

They included keeping the streets tidy and safe, as well as helping the elderly, families, and young people. It doesn’t take much imagination to figure out what will probably happen next: after bureaucrats destroyed the council’s finances, painful service cuts are about to follow.

With a population of little over 100,000 of Birmingham city, the quiet commuter town south of London forced into emergency financial measures in June after collecting debt of £1.8 billion ($2.3 billion). That is a substantial sum for a municipality with an annual budget of barely £24 million. Officials borrowed money and wasted it on questionable business projects including a lavish 24-story hotel, two tower buildings (30 and 36 floors high), and a massive spiral-ramp parking lot. Over the Surrey countryside presently, these served as a depressing reminder of their failure.

The then-CEO of the council, Ray Morgan, contrasted Woking’s prospects with those of Singapore when he unveiled the investment plan in 2014. Instead, the town has come to symbolize spectacular failure in the corporate world. Woking is not the first, though, to experience financial failure.

To discover new sources of income, some communities launched innovative but risky investment ideas. The bulk of the loans they obtained from the Treasury came mostly from the Public Works Loan Board (PWLB), a two-century-old institution that provides funding to local governments and other public entities.

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