Claire Agutter from Scopism takes a look at why Birmingham City Council's predicament is not an isolated case and how other councils can learn from their mistakes.

The recent declaration of effective bankruptcy by Birmingham City Council has sounded a dire alarm on local government finances in the UK. A staggering projected gap of £87m between income and expenditure for the 2024/25 fiscal year has led to the appointment of Government commissioners to oversee operations. This crisis, deeply rooted in Birmingham's inability to cover potential liabilities related to equal pay claims and project failures, highlights systemic issues that subsequent financial challenges have exacerbated.

However, Birmingham is not an isolated case. Local government finances across the UK have been under sustained pressure for years. Austerity measures, initiated in 2010, resulted in a 17.5% reduction in councils' spending power between 2009/10 and 2019/20. Despite recent slight upticks, budgets remain 10.2% below pre-austerity levels, even as demand for services continues to rise.

In this article, we will delve into the financial crisis faced by Birmingham City Council and uncover why it's a crucial wake-up call. We will highlight the urgent need for systemic reforms in local government and discuss various measures that can be taken to navigate these financial challenges while maintaining essential services for communities. We will explore how technology can support local government strategic objectives but must be appropriately managed.

One crucial aspect that local governments must focus on is providing a clear set of strategic outcomes and a supporting framework for strategic planning. This framework aligns services with organisational objectives and ensures sound decision-making at every level of the organisation. By having a clear roadmap in place, councils can effectively allocate resources to areas that need them the most and delegate decision-making to the appropriate level. This coordinated strategic approach ensures that services are delivered efficiently and effectively, even in the face of financial constraints.

But how can councils implement new practices to gain the benefits of new efficiencies? They need to consider:

• Updating, simplifying, and digitising operational processes
• Implementing sound risk management practices
• Reviewing their sourcing strategy and vendor management approach

Operational processes

Changes geared towards improving outdated operational processes are paramount. Making the most out of limited resources is essential for councils grappling with budgetary constraints. By streamlining processes, leveraging technology, and adopting best practices, councils can optimise their operations, ensuring that every pound spent delivers maximum value. Risk management

Identifying and mitigating risks associated with service delivery is crucial for maintaining continuity, especially in challenging financial environments. It's imperative that councils have robust risk management strategies in place. This involves assessing potential risks, developing contingency plans, and regularly monitoring and evaluating the effectiveness of these measures.

Sourcing strategy and vendor management

The failed technology implementation at Birmingham City Council should not imply that all outsourcing is ineffective.

Councils need to review their sourcing strategy to ensure they are leveraging best-of-breed suppliers and creating a flexible supply network that can meet their changing requirements. Seamless service integration is essential for delivering a cohesive and effective service portfolio. This involves breaking down silos and ensuring that different services work together harmoniously. By adopting Service Integration and Management (SIAM) principles, councils can ensure that services are aligned with the community's needs, ultimately enhancing the overall impact of their offerings.

SIAM is supported by effective vendor management, another crucial area that councils should focus on. This involves establishing solid relationships with suppliers, negotiating favourable terms, and closely monitoring vendor performance. By doing so, councils can achieve cost savings while maintaining high-quality service delivery.

Birmingham City Council's financial crisis serves as a stark reminder of the challenges local governments face across the UK. Urgent reforms are needed to address the deep-seated issues affecting councils nationwide, namely the need to adopt a robust strategic planning system that will drive efficiency gains, implement robust risk management, manage vendors effectively, and prioritise service integration. These steps will help councils navigate their way through financial challenges while continuing to provide essential services for their communities.

Dire financial circumstances may feel like a brake to innovation and forward-facing programmes, but in fact, hard times can generate positive changes and new ideas and approaches. Councils need to focus on citizen experience, leveraging the data that they have to increase transparency and simplicity. Digitisation can support cost-reduction, and a flexible supply network can be right-sized as circumstances change.

If this article was of interest, then check out our feature, 'Preventing future Section 114 notices' and 'How to fix local government finance'.