A run-away disaster for Birmingham and Britain?

The cost of Birmingham Council’s Oracle computer disaster may be as much as £343.5 million – even higher than the worst estimates.

Uncollected business rates were supposed to add up to £12.5 million but, in reality, the figure is £140 million, according to Lib Dem Paul Tilsley, the city’s longest serving councillor.

He told a meeting back in March: ‘That (Oracle) system didn't work and it has left us with a bill. We don't know how much but certainly, as far as business rates, £140 million as a starter.'

I asked this week if the figure was accurate and he told me: ‘I would never quote an inaccurate figure.’ I also asked the council but, as usual, they didn’t respond.

The original Oracle budget was £19 million. The official cost is now £131 million. A union-sponsored report by Sheffield University’s audit reform lab added extra costs supposedly caused by the Oracle disaster: £12.5 million in business rate bad debts; £4 million council tax deficit; and £69 million written off in budgeted savings that never happened. That all comes to £216.5 million.

But – and it’s a big but – if Coun Tilsley is right and the business rate deficit is £140 million, that makes the Oracle cost at least £343.5 million. The £140 million represents one third of the city’s budgeted business rate revenue for the current financial year.

And it makes you wonder if this represents something worse than just an incompetent local authority failing to chase up bad debts – a flight of rate-paying businesses out of Birmingham.

The council claims the number of businesses in the city rose by 255 (0.7 per cent) last year but as 89 per cent of them are micro-businesses, that doesn’t mean much. Manufacturing was down 2.7 per cent, construction down 4.3 per cent, hospitality down 1 per cent and transport down 4.9 per cent. Retail business rose 1.2 per cent representing 21 per cent of all the businesses in the city.

But the one big increase was a 6.6 per cent rise in public service ‘enterprises’ (surely a contradiction in terms).

The dreadful possibility has to be that the city is enduring an irreversible decline in genuine private-sector wealth-creating businesses. If that’s true, we may soon see a decline in the other growth-sector, professional services (up a modest 0.3 per cent) not to mention a further fall in business rate revenue.

And you do have to wonder: Is Birmingham’s parlous state representative of the state of the country as a whole?