Birmingham City Council used £63m from reserves to balance its 2017-18 budget after spending almost £21m more than it planned to last year – a chunk of which related to last year’s waste dispute.
While the city’s overall reserves balance actually increased by about £95m last year, Birmingham’s corporate director of finance and governance Clive Heaphy has warned the council cannot continue to adopt such a strategy.
In a report to members of the executive on 24 May, Mr Heaphy said: “It is essential that steps are now taken to manage ongoing budget pressures and the delivery of agreed savings for 2018-19 and beyond in order to reduce the risk of further calls on reserves in the current and future years.”
Birmingham, which has a net revenue budget of almost £822m, needed to find £85.1m savings in 2017-18. The original budget planned to use £42.2m reserves to balance the budget.
Mr Heaphy’s report about the council’s financial outturn for 2017-18 said: “In order to balance the budget at year-end a further £20.9m has been required. Thus in total, £63.1m of reserves were used to structurally deliver the 2017-18 budget, plus £11.7m to fund pension guarantees, which will be repaid from existing budgets in future years.”
Of the £20.9m overspend, £16m was used “to fund the waste dispute” (£6.6m) and manage “pension fund strain” (£9.4m), Mr Heaphy’s report said.
Birmingham endured two months of bin strikes last year after the Unite union challenged the council’s decision to issue more than 100 redundancy notices.
Mr Heaphy’s report notes, however, that the overall reserves and balances position increased by about £95m last year. This was “primarily due”, he said, to the council’s decision to change its minimum revenue provision policy, “which generated an unplanned reserve of £98.3m”. The minimum revenue provision is the minimum amount that must be charged to an authority’s revenue account each year for financing capital expenditure. This will have initially been funded by borrowing.
The reserves and balances pot was further boosted by £36.4m contributions from directorates across the council, while a £23.6m repayment relating to NEC pensions costs was also added.
Overall, Birmingham had £335m in its reserves at 31 March compared to £311m on 1 April 2017.