Il consiglio comunale di Birmingham probabilmente non è mai andato in bancarotta, afferma l’esperto contabile

I think the only thing worse than your budget rendering you bankrupt is having such poor book keeping that you miss a £bn of assets and think you are going to go bankrupt.

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>However, having done a fresh analysis of the council’s 2022-25 financial accounts, James Brackley, a lecturer in accounting at the University of Glasgow, claims the council underestimated its reserves position by more than £1bn.

>…

>According to Brackley’s analysis, the council underestimated and mischaracterised its reserves in 2023 and overestimated its equal pay liability at £650m to £760m.

>Although details of the equal pay settlement reached with the Unison and GMB unions this month remain confidential, in its latest financial accounts the council stated it had set aside £404m for its equal pay liability.

>Brackley also said the council attributed that liability to its general fund reserve, when it could have been paid for by its capital receipt reserve, as was later the case.

>The council said it was required to account for the potential liability for equal pay in 2023, not a potential settlement figure, and that would have put the council into a negative reserves position. At the time, it was unable to capitalise those costs, it said.

As far as I can tell, there are two points to this:

* Firstly, it’s the view of one accountant. He may well be right; but it’s worth remembering that he is contradicting the views of other accountants, who *also* might be right. In other words, this might just be a situation where experts disagree in their analysis, rather than him proving that the Council got it wrong.
* Secondly, the Council’s position was based on estimates of what the potential hit from the legal case about gender equality might be; the fact that those estimates turned out to be more than was needed doesn’t mean that they weren’t effectively bankrupt in 2023, because they could only calculate the figures based on what they thought might happen. The fact that the cost ended up being less than estimated doesn’t mean that the Council did the estimate incorrectly (as they had no way of knowing what the agreed settlement would be, or even if there would be an agreement), or that they were wrong to make a statement on the state of their finances based on the estimate.

Excellent take. Accountancy is as much an art as a science, and there are multiple correct (or at least defensible) ways to calculate your balance sheet at a given time.

Local authorities are sat on over £30Bn of reserves. They actually increased their reserves from £12Bn throughout the entire period they claimed they were skint due to government cutbacks to record levels every year.