Birmingham City Council

[armchairfan]

Whilst the attention of most people is on activities somewhat more distant, I can understand why this issue has not been raised here as far as I know.

The alleged decrease of funding from central government (i.e the general taxpayer) is probably a major factor in the declaration of effective bankruptcy, the issue of the enormous bill for the settlement of equal pay claims, going back many years, is significant, to put it mildly.

What I don't understand is how the Council, for many years, either ignored or circumvented the relevant legislation: for most, if not all of this period, it has been a Labour-governed Authority, operating in the interests of the people of Birmingham; I would imagine that the Authority would, in turn, work cooperatively with staff representatives.

How can it be, therefore, that many hundreds of council employees have been consistently and unlawfully been underpaid for years...were senior officials simply incompetent? Did the elected members fail to exercise proper oversight? Did the unions, collectively or individually, fail to look after their members' interests?

Worse, is it all possible that the Unions preferred to protect their political influence within the labour movement generally, at the expense of their own members, by not "rocking the boat" at a Labour-run Authority?

I am genuinely puzzled by all of this, and some input from anyone who actually knows more about it than me would be most welcome - at present the thoughts expressed above can be dismissed as a conspiracy theory, but some background facts will always put an end to conspiracies.....

[mattmw]

This article outlines the details of the original case about equal pay, and is a useful summary

www.bpslaw.co.uk/council-workers-win-landmark-case-equal-pay/

Its not so much that the Council paid men and women differently for the same job, but that different jobs in the same pay bracket were paid different bonuses. So women in traditional roles of cooking, caring and cleaning roles didn't get bonuses but men on the same pay scale doing waste collection, driving and building works did get paid a bonus plus the basic wage.

Initially the Council did pay compensation for workers affected, to the tune of around £1 billion, but the high court then ruled at these claims could be made from staff who had left the Council employment but not made a claim, so the bill went up again around 2012.

From what I've read the mistake the Council made was not settling the claims in full at this time, but instead tried to pay the compensation over a longer period of time through borrowing. Back in 2012 the interest rates were 0.5% and borrowing was cheap, and with austerity measures in place at that time, paying a one off lump sum from Council coffers would probably have wanted meant lots of core services would have had to be cut. So there was some logic in trying to pay it back over the longer term and spread the cost over a number of years.

However as time progressed and interest rates rocketed again, that borrowing is now much more expensive so the the cost of repyments has escalated. Through Union action and solicitors encouraging back claims going back a long time the costs have kept going up and up. I've read some reports that the package of payments needed to settle claims is around £250 million more than it would be had it been paid in full around 2012.

In different times with a growing economy and maintance of central government grants a Council the size of Birmingham probably could have accomodated this extra expenditure through its annual budgets, but with the wider pressures on adult social care post covid and a real terms decline in government funding the overall deficit the council faced became insurmountable.

Judging by this FT article there could be other Councils likely to face similar claims.

www.ft.com/content/c390054d-9618-4695-b210-53d9000a8242

Thats my interpretation anyway but sure there are others too!

[armchairfan]

Thanks for that - I am most grateful.
I cannot access the FT piece, but from what you say, it would appear to be the case that someone in the Authority failed to appreciate that interest rates can go up as well as down - that level of intelligence should be rewarded with dismissal, methinks.
As for the Unions, it can be argued that they are now doing their bit as far as protecting their members' interests, but the initial problem of incorrect bonus payments clearly arose under THEIR not-so-watchful gaze, and they now have the effronery to claim some sort of "victory" at the expense, naturally, of Birmingham residents; should the Unions use some of their funds as some recompense?? (not a serious suggestion, honestly)

[mattmw]

Oct 20, 2023 18:12:18 GMT 1 armchairfan said:

Thanks for that - I am most grateful.
I cannot access the FT piece, but from what you say, it would appear to be the case that someone in the Authority failed to appreciate that interest rates can go up as well as down - that level of intelligence should be rewarded with dismissal, methinks.
As for the Unions, it can be argued that they are now doing their bit as far as protecting their members' interests, but the initial problem of incorrect bonus payments clearly arose under THEIR not-so-watchful gaze, and they now have the effronery to claim some sort of "victory" at the expense, naturally, of Birmingham residents; should the Unions use some of their funds as some recompense?? (not a serious suggestion, honestly)

Oh yes sorry the FT article is probably behind a paywall sorry. It basically outlines around 20 other large councils might have to make similar levels of compensation, but also answered some 

With the decision to borrow money to pay the compnsation that would have been a decision taken by the full council rather than a single officer. The balance they would have had to make at the time was whether to fund the bill of around £1 billion from their annual budget of about £3 billion - which while possible would have been a third of the annual budget and seen big cuts in services as a result. So spreading the payment over a long period through borrowing was likely the only option to them. Im sure they assessed the potential for interests rates to rise but at the time that was probably a lower risk strategy then a big cut to services. 

In terms of the Union role they had indeed been pressing for equal pay for all staff for many years through the 80s and 90s but only really achieved this through early legislation the new labour government brought in in 1997. This led to a major review of job descriptions and pay grades and developed a uniform system across all councils under an umbrella organisation called the Local Government Association, and standard National Joint Council (NJC) to set the scales was established. This process also brought together equal pay scales and many past issues around equal pay from the 70s 80s and 90s were resolved at that time - and the NJC pay structures remain today and are the basis of my pay cheque each month 

The next big change came in 2010 with the equalities act, which was one of the last pieces of legislation brought in by the Brown government and also incorperated some EU laws into UK law around employment law, and its this legislation that the 174 Birmngham workers brought their case against the Council, and centred around part time staff (who tend to be more women) were not offered the same terms and conditions as men doing similar roles, in part because their terms of employment were reduced during maternity leave, or because they returned to work on reduced hours. The High Court also ruled that rather than pay disputes needing to be made within 6 months of leaving a councils employment, this could be backdated for 6 years and include agency staff as long as they were paid through the Council.  As well as missed pay, councils also had to meet the inflationary loss as well - hence the big bills. By 2010 Birmigham had already settled over £1 billion of claims but were then faced with a further large bill as a result of this case. 

Its perhaps ironic that the last piece of major legislation a Labour Government introduced in 2010, has come back 13 years later to haunt one of the biggest Labour Councils in the Country. Probably the law of unintended consequences

[armchairfan]

As a former elected member of a Local Authority, I do appreciate that the decision would have been taken by the full council, but, of course, guided by the recommendations of the relevant paid Officer(s); the fact remains that someone, somewhere, didn't ask the right question: "what if interest rates go up...?"

I take the point about the Unions, but I still feel that they have not exactly covered themselves in glory, and it is probably the locals who will face the consequences.

All in all, a total lash-up!

[mattmw]

Oct 20, 2023 20:57:54 GMT 1 armchairfan said:

As a former elected member of a Local Authority, I do appreciate that the decision would have been taken by the full council, but, of course, guided by the recommendations of the relevant paid Officer(s); the fact remains that someone, somewhere, didn't ask the right question: "what if interest rates go up...?"

I take the point about the Unions, but I still feel that they have not exactly covered themselves in glory, and it is probably the locals who will face the consequences.

All in all, a total lash-up!

I would assume that the S151 Officer officers a risk assessment when taking out any borrowing in Line with the 1972 Local Government Act which I guess was the process you used as a Councillor too. Would be interesting to dig out the report where the decision was taken and what comments were made during the Council debate though. As you know Councillors don't always vote based on officer recommendations

I think the initial decision could have been taken in good faith, the lack of action in recent years 2016 onwards - to rectify the situation shows a lack of strong leadership at the Council, and they do seem a little like enertia set in and stopped them making a decision and kind of hoped it would all resolve itself, or that the overall finances of Councils would pick and reserves would be sufficent to pay the bills. 

Will be interesting to see the how the government appointed officers brought in to run the Council try and resolve the situation as I can't see the Government keen to pay the bill from central funds, and their own rules stop Councils raising Council tax beyond the rate of inflation. So potentially its more borrowing or cuts to services, which as you rightly say impacts the most on Birmingham residents