Michael Gove will this week announce the appointment of commissioners to take over the day-to-day running of Birmingham city council after the local authority effectively declared itself bankrupt.
The housing secretary’s announcement, which could come as soon as Tuesday, will mean that the commissioners oversee the council’s financial decisions and management appointments.
The commissioners, whose appointment was revealed by the Sunday Times, will preside over what is likely to be a fire sale of assets, which could include the Library of Birmingham and Birmingham Museum and Art Gallery.
In 2015 it sold assets including the National Exhibition Centre for £307m, but that was not enough to prevent it from issuing a formal announcement earlier this month that it did not have the resources to balance its budget.
A spokesperson for the communities department said: “We continue to engage regularly with Birmingham city council, as we have done in recent months, over the pressures it faces, including around its equal pay liability, and have expressed serious concern over its governance arrangements.
“We have requested written assurances from the leader of the council that any decision regarding the council’s issues over equal pay represents the best value for taxpayers’ money.”
Birmingham issued a section 114 notice on 5 September, warning that it did not have enough money to cover its liabilities. Officials said it faced a shortfall of £87.4m for 2023-24, forecast to rise to £164.8m in 2024-25.
The council has paid out over £1bn as a result of an equal pay ruling that female employees missed out on bonuses paid to men, and is facing a further £650m-£750m in claims. John Cotton, the council leader, said earlier this year that problems with a new IT system would cost as much as £100m to fix.
Council leaders will meet on 25 September, when they will present a financial recovery plan laying out in detail what they will sell.
The Sunday Times said buildings in the crosshairs included Aston Hall and Sarehole Mill, an 18th-century mill that is said to have been the inspiration for a mill at Hobbiton in JRR Tolkien’s Lord of the Rings. The Library of Birmingham building could also be sold, even though it was built only 10 years ago.
The section 114 notice, which has been issued by six other councils since 2020, including Croydon and Thurrock, means the council is allowed to spend money only to protect vulnerable people and maintain statutory services.
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Croydon council issued its third such notice in 2021, while Thurrock did so last December after it got into difficulties over borrowing large sums to invest in solar energy.
Woking issued a section 114 notice in June due to what it said was “an extremely serious financial shortfall” owing to a £1.2bn budget deficit caused by risky commercial investments.
Several other local authorities are also facing financial difficulties, including 26 councils in some of Britain’s most deprived areas, which are also at risk of effective bankruptcy within the next two years.
The Local Government Association has said it expects the total funding gap for local authorities in England and Wales as a whole to grow to £2bn or more this financial year.