Sunday, July 15, 2012

The truth behind Labour’s claimed £21million “black hole” – part2

The truth behind Labour’s claimed £21million “black hole” – part2

In part 1 of my investigation into the truth behind the Labour administration for Birmingham City Council claims of a £21million ‘black hole’ – see  I showed the following:
a)      The claimed “£21million black hole” is really a budgetary pressure.
b)      That a £21million budgetary pressure at month 2 in Birmingham City Councils budget is nothing unusual.
c)       That similar budgetary pressures have existed in month 2 in Birmingham City Councils budget and the previous administration has reduced these down to zero by month 12.
d)      The new Labour administration is withholding from public scrutiny the end-of-year accounts for 2011/12. These are always made public at the end of June.

For this blog, I want to look a bit more closely at the budgetary pressures that the previous Conservative-Liberal Democrat administration inherited in June 2004 from Labour.

The below table shows the budgetary pressures for each month during the 2004/5 municipal year.

Month in Financial year 2004/5
Date the Cabinet report was presented
Month 2 revenue financial pressure (£millions)
Month 2

Not reported
Month 3
Month 4
Month 5
Month 6
29/11/2004 (revised20/12/2004)
Month 7
Month 8
Month 9

Please note that months 1, 10 and 11 are normally not reported. Month 12 is the end of accounts.

As you will see above, the financial pressure for 2004/5 reached a peak of £31.8million in month 5. The increase in predicted overspend was due to a Social Services department that was massively overspending. By the end of the year the account show that  this had been reduced this to an underspend of £4.8million – this was done by careful budget monitoring and identifying where the Council budget was being overspent.

If you take into account inflation, the £31.8million budgetary pressure in month 5 2004, is worth £39.4million in today’s money

For Councillor Sir Albert Bore to complain about a £21million budgetary pressure in month 2 is complete nonsense. The previous administration inherited a £39.4millon, in 2012 values, budgetary pressure from his administration. The previous administration dealt with it and reduced it to an underspend by the end of the year.


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