2023-09-05 20:05:00
The city of Birmingham, the second largest in the United Kingdom, declared itself insolvent this Tuesday (5), and warned that other municipalities could suffer the same fate, blaming the central government for underfunding, as well as the economic situation.
The City Council of this city in central England, which manages the public services of more than a million people, a unique number in the country because London is divided into districts, relied on “section 114” of the Government Finance Act 1988 venue, self-declared insolvent.
This means that only essential expenses will be maintained, and the situation is equivalent to the bankruptcy of a company. The municipal administration is no longer able to balance its budget, as required by law, without help from the central government.
This legal instrument also determines that the members of the Chamber present an action plan within 21 days to face the deficit.
Leaders of the Labor Party, the acronym that controls this Legislative House – one of the largest in Europe – called the measure a “necessary step” to reposition spending on more solid bases.
They blamed “long-term issues”, including the implementation of a new IT system, for the 87 million pounds (R$ 543 million, at current exchange rate) shortfall in their annual budget of 3.2 billion pounds (R$ 543 million). $20 billion).
But the alarming state of their finances was compounded, they said, by “rampant inflation”, currently the highest in the G7, rising costs of adult social services and cuts in corporate taxes.
At the same time, they denounced that successive Conservative governments cut the city’s funding by 1 billion pounds sterling (R$ 6.2 billion) since they came to power in 2010.
Birmingham City Council Mayor John Cotton and his deputy Sharon Thompson said the city was not alone in this situation and local authorities across the UK were facing what they called “a perfect storm”.
With soaring social spending and rising inflation, city administrations such as Birmingham have been faced with “unprecedented financial challenges”, said Cotton.
He cited an estimate by the federation of local communities Sigoma, according to which 26 of these municipalities could declare insolvency in the next two years.
“Clearly, it is up to the locally elected councils to manage their budget,” reacted a spokesman for British Prime Minister Rishi Sunak.
In the United Kingdom, the municipal budget depends on revenue obtained from local taxes collected from citizens and companies, but also on a contribution from the State, which has decreased considerably, mainly because of the austerity policies of the 2010s.
According to the Institute for Government think tank, state funding fell by 40% in real terms between when the conservatives came to power, and since then, it has increased, due to exceptional payments related to the covid-19 pandemic.
“The funding system is completely broken. Local councils have been doing miracles for the last 13 years, but there’s nothing left,” warned Sigoma chairman Stephen Houghton, who asked the central government for help.
Before Birmingham, the London Borough of Croydon and the town of Thurrock, east of the capital, declared themselves insolvent a year ago.
“The central government let the local administrations live off the budget. […] for too long,” said Jonathan Carr West, director of the Local Government Information Unit, an association that advises communities.
“Birmingham is the most important House yet to declare itself insolvent, but if things don’t change, it won’t be the last”, he warned.
#Birmingham #UKs #city #files #insolvency #International