How Labour drove Birmingham to bankruptcy: GUY ADAMS investigates how a toxic combination of ineptitude and extreme political dysfunction saw Britain’s biggest council go bust – all under the watch of a leader handpicked by Keir Starmer
Every schoolday, a driver pulls up outside a home near Castle Bromwich on the eastern outskirts of Birmingham, picks up a child and takes them exactly one-and-a-half miles to the local secondary, Park Hall Academy.
In the evening, the process takes place in reverse: the same child is picked up from the school, which has around 1,300 pupils aged 11-18, and driven straight back to their family home.
Each of these trips lasts between five and ten minutes and would cost around £6.20 were the driver to be working for one of the many minicab firms based in the area. But the driver in question doesn’t work for a normal minicab firm.
And rather than charging £6.20, his employer invoices a whopping £60, the equivalent of £40 per mile, or roughly a pound for every 40 metres.
The employer in question is one Jameel Malik, a 45-year-old entrepreneur behind a company called Green Destinations. And the free-spending client? That will be Birmingham City Council, which has awarded this small firm a series of ultra-lucrative contracts to ferry children with ‘special educational needs and disabilities’ around the city.
Leaked documents obtained by the Daily Mail show that Green Destinations, based in a tiny office above a nursery on an industrial estate in the working-class Hockley neighbourhood, was paid an astonishing £17 million by the council during the last academic year.
Absent: Council leader John Cotton — above with daughter Rose — is still on holiday in New York
The work was nothing if not fantastically lucrative. In addition to taking this one child to Park Hall Academy each day, at an annual cost of £22,800, the firm charged taxpayers £40,532.70 — not far short of a year’s fees at Eton — to take another youngster to and from Halesowen College, which is 3.1 miles from their home.
How these astonishing contracts were agreed was recently the subject of an official investigation, with analysis showing that rival specialist companies had been willing to do the job for roughly £6 million — just over a third of the price the council actually paid.
READ MORE: How ‘bankrupt’ Birmingham council spent millions on botched IT system, ‘inclusive’ new street signs, and the Commonwealth Games
A whistleblower working in Birmingham’s ‘Children and Young People’s Travel Service’ told superiors that colleagues had ‘knowingly enabled or allowed overcharges to occur’ by signing off deals under which Malik’s firm is being routinely paid around £200 per day to take a lone pupil, via a wheelchair-accessible cab, a few miles to and from school.
How were these astonishing sums calculated? The answer is anyone’s guess: Birmingham City Council has refused Freedom of Information requests to make any findings of its internal probe public, citing the fact that ‘information was given in confidence’ to the people who conducted it.
One thing we can be sure of, however, is that ferrying children to school in taxis is costing ratepayers of Britain’s second city a truly gargantuan sum.
Financial documents published by the council show that the overall Children and Young People’s Travel Service, which transports 5,177 local kids to school, is currently chewing through an astonishing £230,000 every single day.
In the last academic year, the department had a total budget of just over £40 million. However, it actually ended up spending almost £59 million, meaning it was more than £18 million, or almost 50 per cent, over budget.
(That £18 million figure is, coincidentally, only a fraction more than the £17 million that was shelled out to Green Destinations.) Meanwhile, Mr Malik’s firm has, in the past two financial years, increased its bank balance from £260,000 to £2.6 million, according to documents filed at Companies House.
Costly £17million taxi contract: To ferry children to and from school
So far, so surreal. Yet in the free-spending world of Birmingham City Council, financial profligacy is par for the course.
On Tuesday, the Labour-run authority filed a Section 114 notice, which is local government’s equivalent of declaring yourself bankrupt, saying it can no longer afford to pay bills.
The organisation, which sails through a budget of £3 billion a year, is currently shipping out £87 million-a-year more than it has coming in, and has already overspent by a total of £413 million between 2018 and 2022.
Adding to its financial woes has been the realisation it faces an additional incoming bill of £760 million to settle equal pay claims from disgruntled employees.
The sum, which is increasing by around £14 million a month, appears to have been ‘materially understated’ by whoever pulled together the last two sets of annual accounts.
This week’s development means all spending by the council must immediately stop, unless it’s dedicated to protecting vulnerable people or providing statutory services. All 10,600 staff at what is Europe’s biggest local council — with 1.1 million taxpayers on its patch — have now been invited to apply to quit under a ‘resignation scheme’.
It is, all told, one of the biggest debacles in the history of British civic politics. And, inevitably, the question of who’s to blame is now the subject of fierce debate.
Local Labour grandees spent the week arguing that cuts to central government funding skewered Birmingham’s finances. But almost everyone else seems to think that a toxic combination of corruption, ineptitude and extreme political dysfunction is what really triggered the crisis.
Even the trade union Unite, which rarely finds itself echoing Tory talking points, saw fit to issue a statement accusing the council of ‘chronic financial mismanagement’.
Caught in the crossfire is Sir Keir Starmer, who is grimly aware that his party’s disastrous stewardship of Birmingham risks undermining public faith in its ability to govern. ‘They’ve bankrupted Birmingham, we can’t let them bankrupt Britain,’ was how Rishi Sunak put it in Parliament this week.
Diverting attention: The city hosted the woke Commonwealth Games in 2022, costing £184million
Embarrassingly, on this front, the man now at the heart of the crisis, council leader John Cotton, turns out to have been hand-picked for the job by Starmer himself. He was appointed in May, as the financial crisis mounted, following a putsch that had seen predecessor Ian Ward ‘encouraged to quit’ by national Labour figures.
In a surreal sub-plot, the hapless Mr Cotton could this week be found giving interviews to the media via video link. It later emerged he was actually in New York, having decided to high-tail it across the Atlantic with family members to celebrate his 50th birthday.
According to his daughter Rose, he’d known about the city’s impending meltdown before leaving, but decided to go anyway because ‘this birthday trip was arranged two years ago and we didn’t want him to miss it’.
Cotton intends to remain in the Big Apple until Monday.
READ MORE: Furious locals slam bankrupt Birmingham council for wasting £10million on 2.5-mile cycle highway that is wider than a bus lane, barely used and causes traffic chaos
To understand how this shambles came to pass, we should perhaps wind the clock back to 2012, when Labour gained overall control of Birmingham City Council following an eight-year period when it had been run by a Conservative and Liberal Democrat coalition.
The same year brought a Supreme Court ruling in favour of 174 low-paid female employees —largely cooks, cleaners and carers — who claimed they had historically been paid less than men. The ruling dramatically extended the time workers had to seek compensation, from six months to six years, and opened the floodgates to huge numbers of claims.
Facing what legal experts feared would be a local government’s equivalent of the PPI scandal, which saw financial institutions facing decades of incoming lawsuits, a sensible administration might have tightened its belt and knuckled down to the tricky business of navigating the fallout.
Instead, Birmingham’s leaders chose to focus on unveiling a costly succession of high-profile infrastructure projects, many of which were woefully mismanaged.
Among them was the 2013 opening of the city’s Central Library, which cost more than £180 million to build and still more to run. The plan had been to fund its ongoing operations via sponsorship or charity grants, but insufficient cash materialised and a trust that was supposedly set up to raise money was wound up in 2016.
By then, more than half of the place’s 188 members of staff had been made redundant and visitor numbers were cratering, down from 2.4 million in the first year to a mere 944,000 by 2019. At the same time, the council was shelling out £10 million a year to service debts from the original construction.
There has also been a string of costly transport projects, none of which have done much to ease traffic on the city’s clogged streets.
White elephant: Mass redundancies at the city’s high tech library, costing £180million
Tens of millions were spent converting the city’s bus fleet to run on hydrogen, while £10 million was put towards a 2.5-mile ‘cycle superhighway’ which reduced capacity on one of the main commuter routes into the city yet is often photographed looking almost entirely empty. Meanwhile, moving a single coach depot 300 yards racked up a bill of £16 million.
By 2019, Birmingham’s finances were in such dire straits a group of non-executive directors was brought in by the Government to sort them out. But their advice, which largely involved taking difficult and potentially unpopular decisions to rein in spending, seems to have been largely ignored.
Max Caller, one of those directors, revealed this week that he told council leaders to start by ditching plans to host the 2022 Commonwealth Games, since they were likely cost a fortune and divert attention from sorting out the cash crisis. That suggestion got short shrift.
‘I take nothing away from the city and the people for the brilliant job they did in delivering the Commonwealth Games,’ he told BBC Radio 4. ‘But if you’re doing that, there is a limit to the political and managerial capacity to focus on other things, and it becomes all-consuming.’
The Games eventually cost the council and its partners £184 million.
For this money, local taxpayers were bombarded with wokery. Its three-hour opening ceremony, for example, included 35 people carrying Pride flags (to represent Commonwealth countries where homosexuality is illegal) and culminated with a giant mechanical bull being carried into the stadium by 50 women in chains, symbolising the oppression of women during the Industrial Revolution.
Caller said he continually advised the council to ‘focus on doing the basics’. But factions within its gargantuan management structure have for years seemed more concerned with political posturing.
Three years ago, for example, the council was ridiculed for setting up a panel that decided to give new streets a series of ultra-progressive names, including ‘Destiny Road,’ ‘Diversity Grove,’ ‘Humanity Close’ and ‘Equality Road’.
Ironically, given their ongoing legal troubles, Birmingham’s commitment to inclusivity does not appear to have extended to paying working-class female employees a proper wage.
Like many a public sector behemoth, the council has also been chaotically managed. It has burnt through no fewer than seven chief executives since 2017 (current incumbent Deborah Cadman, who earns £184,374 plus £40,000 in pension contributions, has been in situ since 2021), not one of whom managed to get even a vague grip on the looming financial crisis.
Particularly damaging, in this context, has been the woeful stewardship of a large IT project designed to run its HR systems and pay creditors.
The new system, supplied by tech firm Oracle for £19 million, was initially supposed to go live in December 2020. However, errors with its implementation mean it’s still not properly working and the council now faces a £100 million bill to put things right.
As a result, staff in many council departments have been left completely unaware who owes them money and are being reduced to using credit cards to pay outstanding invoices.
Meanwhile, thousands of financial transactions appear to have disappeared from records without trace, while the failure to properly pay bills led to bailiffs turning up at schools in the summer.
The mess appears to have its roots in a late decision to reject the off-the-shelf version of the Oracle software that was originally supplied. Instead, officials decided to customise it so that staff in finance departments wouldn’t need to bother adapting their existing working practices.
Disaster ensued. At least one of the senior managers responsible for the ensuing mess, strategic director of management, Rebecca Hellard, left her post in May, at the same time as a report into the debacle was completed.
However, the full findings of that report were kept under wraps after councillors voted to prevent the Press and members of the public from attending a hearing into its findings.
Secrecy is a recurring theme whenever scandal comes to Birmingham. But at least one official report into its shameful mismanagement has found its way into the public domain.
That would be a 20-page document compiled by an ‘improvement board’ that was asked by Labour’s ruling National Executive Committee to examine why its stewardship of the city was going so drastically wrong.
Released in May, (and promptly leaked) it found that ‘a legacy of years of personality-driven factionalism, cultural challenges, two particularly bitter industrial disputes, a recent divisive leadership contest and changes to governance have had a detrimental impact on the mood and morale of the Labour Group’.
It found misogyny and abuse rife among local members, with ‘one case of serious intimidation and harassment reported to the party’. Women councillors also reported harassment when out campaigning, at polling stations and from relatives of other councillors. ‘There will be a zero tolerance to intimidating behaviour, micro-aggressions, harassment and vexatious complaints,’ the report insisted.
The report, which has been seen by the Mail, uncovered a ‘dysfunctional climate’ at the council and said it suffered from ‘long-standing and persistent issues in getting the basics right’.
And while Keir Starmer and his allies publicly spent this week blaming Birmingham’s financial woes on Tory austerity, Labour’s own secret party report instead declared: ‘Budget cuts and the size of the city are used as reasons to explain the situation, however, this does not hold up to scrutiny.’
In other words, the Labour council which sees fit to spend £60 on one-and-a-half-mile taxi rides has accidentally proven the enduring truth of Margaret Thatcher’s most famous adage: that the problem with socialism is that, eventually, you run out of other people’s money.
Additional reporting: Oliver Price
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