Birmingham council goes bust

[cromwell]

Birmingham council has issued a 114 notice, effectively declaring itself bankrupt.
The notice, preventing all but essential spending to protect core services, was issued on Tuesday with council leaders blaming a £760m bill for equal pay claims, problems installing a new IT system and £1bn in government cuts over the past decade.

The council said “it does not have the resources” to fund its equal pay liability, and has a gap in its current budget of £87m.

Demand for adult social care is up, revenue from business rates is down and inflation is up.

So how do they get out of this one?

[Workingman]

How about they stop it with the speed bumps, chicanes, sleeping policemen, speed cushions, 20 MPH limit signage, cycle lanes and cycle super highways, 'active' streets, installation "street art", funding "minority" events, creating non-jobs... the list goes on.

Try focussing on what the majority of council tax payers want and pay for and not all these pet projects. Only give bonuses when they are earned and then at a fixed £ rate not a % of wage.

Same goes for other councils...

[cromwell]

Just had a quick look at the council IT problem.
Dear oh dear oh dear.

Initial budget of £20 million circa 2018. Rising to £50 million plus, then another £40 million plus to try and fix the problems. £100 million in all - so far.

Bought to try and improve the councils internal procedures, including HR and payments.
Thing is, when you buy an off the shelf IT package you try and buy one that matches your requirements, as far as possible.
What you don't do is buy something that has to be amended many times to try and meet your requirements, because trust me, you know where that's going to lead.

But not Birmingham council. This Oracle cloud system was apparently designed more for a manufacturing / trading business, not a council business.
So, it has to be amended.
Birmingham council ended up having to alter it's own internal procedures to match the demands of the system that they had just bought!

I've seen this before. Council goes to big name supplier, council buys wrong product, cost and time overrun and you end up with a system which by the time it goes live has already had many patches applied to it, etc etc.

Fiasco.

[Suff]

Ah dear, councils and IT costs.

So you under pay our own IT staff, which means they leave and you get left with the dross. The dross are asked to recommend a product and they are told by finance to go through "preferred suppliers". The preferred money makers recommend a product which will require significant "customisation" before it is able to be put into production and then win the contract to "deploy" it because they recommended it and so, theoretically, have the best knowledge of it.

See I can play that game too.

Me, I'm an expensive contract scum. When the consultancy comes with people who charge £3,000 a day, I ask awkward questions and make them sign in blood to deliver what they say they will deliver. I include penalty clauses for failure to deliver and make it so that they question the "value" they might get out of trying to rape my company I'm working at.

Still, it doesn't always work. I tried to get rid of my current supplier but the management wants the "protection" of a supplier that fails, rather than owing the task and taking the hit if our own people fail.

It is a game and it will always go on.

Personally if I could get a company to do this for Governments I'd want Tesla software. Of course Tesla only write software for Tesla bu the way they do it is incredible. Their CIO talked about this and it is almost exactly what you say Crommers.

Speed and Agility: As a business, we had to move extremely fast and also be agile for catalyzing a fundamental change in the automotive industry. IT function had the task to enable the business to be operating with the highest speed and agility. To do that, we needed a business operations software/ERP system that is simple, lightweight and flexible enough to satisfy our core business needs.

We couldn’t find such a system. Every system out there was built, not for one company or one industry, but built for several industries and tens of thousands of companies. By their nature, they are heavyweight, with functionality to satisfy all the needs of the world and additional bells and whistles. They are not very fast and not very flexible.

Traditionally, companies buy best-of-breed software for one or more business functions and then spend enormous amount of energy, resources and money to integrate, manage and maintain it. The information flow is not smooth or seamless because many times these applications do not talk to each other easily. So we ended up building one.

It is a merry go round. I have a friend who is a senior vice president of IBM development out in Europe. I told him about this and he said it was a really good achievement. When I told him it was done with 25 developers he had to pick his jaw up off the floor.

There is one born every minute as they say. The problem is that most of them wind up in council offices making decisions on IT.

That and I fully endorse everything WM said.

But as I said above who would take the risk right? Maybe a crazy eccentric man.

[Suff]

Following the breadcrumbs leads to a highly interesting read.

The 2014 budget in which they set out their plan to deliver on the 2012 downsizing goals has some enlightening things.

First they estimated that the 10 year cost of equal pay would be £27m.

But buried down in the detail end is a risk.

Loss of
knowledge,
experience
and capacity
across the
organisation as
the workforce
is down-sized

It is estimated as a significant risk with a high impact.

Significant: Likely, will probably occur in most circumstances. 50% - 80% chance

Description Example Detail Description
High: Critical impact on the achievement of objectives and overall
performance. Critical opportunity to innovate/improve performance
missed/wasted. Huge impact on costs and/or reputation. Very
difficult to recover from and possibly requiring a long term recovery
period.

In the Actions section is:

Development of job enrichment

Now besides the questionable decisions, the laughably naive IT strategy and the very airy fairy budget, was the recognition that the government was going to continue cutting budgets out to at least 2019 or longer. So they knew about the £1bn they were going to lose. But they spent the money as it it didn't matter.

So, back to how they failed.

Officers informed Cabinet on 28 June 2023 that the potential cost of new Equal Pay
claims (brought about as a result of existing claims of job enrichment and evidence of
task and finish practices taking place in some teams) would be between £650 million and
£760 million.

Now besides the fact that they can't determine their equal pay liability any closer than £110m, this is on a projection of equal pay costs of £27m out to 2024.

So they knew they would lose money, they collapsed their IT department to go for a "services" approach and enacted their "risk mitigation" for staff which turned a £27m cost into a £760m cost.

Sack the lot of them, they are totally incomopetent!

[Workingman]

The IT system is dire, no getting away from that, but it is about £100 over four or five years and it looks as though both sides did not do their homework, so both are to blame.

However, the big issue is the equal pay claim of £650m to £750m. That's where the problem really lies. It is not an IT issue as the media is playing it, it is a failure of council employment policy and HR processes. Some 170 female employees took the council to court on behalf of about 25,000 other claimants over under-payments during a period of about 10 years from 2012 and won. Each claimant is due about £30,000.

I am not sure why his is largely being overlooked in favour of the IT mess. PC?

[Suff]

I am not sure why his is largely being overlooked in favour of the IT mess. PC?

I would say so. It is very clear from the 2014 budget document that they totally misinterpreted both the risk and the cost of job enrichment.

Nobody wants to talk about the fact that all this equal pay and job "satisfaction" is un-affordable and even more so for a fixed income entity such as a council. It all looks good on paper but reality bites.

The thing is by going bust it is quite possible that they can avoid that court mandated back pay. Or even pay it out over 2 or 3 decades.

But that won't be reported in that way either. It will be reported as an IT disaster which forced them to renege on "justified" pay for staff.

[cromwell]

I just mentioned IT because I know (knew) more about that than about equal pay. Although how 170 employees can cost the council circa £700 million??

It's just amazing how often you see this IT project collapse happen. It's like a car crash in slow motion, you know what's going to happen but no one is able to stop it once the wheels are in motion.

[Suff]

Government IT projects suffer from many illnesses but the largest by far is SSADM. The years long process of asking the wrong people what they do and building a design for a system that does not meet the actual use cases whilst being totally unable to change the design without a holy writ from God.

Even though the Government IT project Titanic can actually see the iceberg ahead, the only recourse in almost every case is to light the remaining boilers and go full steam ahead.

Added to the fact that the #1 resolution to a government IT project overspend is to get rid of the incumbent staff with the knowledge of what is done today, before the project finishes and you have the perfect fiasco. They are so practised at it that they can do it Every Single Time without even trying hard.

Of course the real story here is the "risk mitigation" action to offer everyone Job Enrichment then to price it into the budget at around 3% of the real 10 year cost.

I believe that the council could have weathered the IT fiasco fairly well. But they cannot comply with the equal pay court order and also provide the services they have committed to. As you can't ignore a court order, without going to jail, you need another legal way to avoid that. This way is bankruptcy.

Of course if they had any gumption and the slightest miniscule of backbone they would have cancelled all road works, all non essential sdervices and all development services and then negotiated to pay back the 3/4 of a billion £ of back wages mandated by the courts. They would then have outsourced all back office staff and made the staff redundant. Whilst publicly calling the court out for forcing this action.

So, Bankruptcy.

We currently have 12,453 employees occupying 13,228 posts. Of these 4% are under the age of 24 and 4% are aged 65 and over with over a third aged between 45 and 54

2018-2022

Even then, that's about 5 years at £13,000 a year for every member of staff. Less for a decade. it must be a very long term settlement. I wonder what the court thought it was doing? The Birmingham city council budget is in the £1bn range. Allocating 3/4 of that in wage settlement was never going to fly.

[Workingman]

Although how 170 employees can cost the council circa £700 million??

It isn't just the 170. If it was they would each be in line for about £4.5m each. The 170 came forward in a class action or group litigation on behalf of a number of others in the same situation under various Equal Pay Acts from 1970 to 2010.

BCC employed them under terms they must have known broke the law, hence the recent court judgement covering the period from 2012 to the present. To knowingly break the law was a human decision by officers of BCC HR and finance departments and those involved should be prosecuted.