Birmingham on the brink

First, there are the angry voices of council tenants. At a residents meeting in Balsall Heath, 312 of them are complaining about the rats and refuse proliferating in communal areas over the long, hot summer. There are allegations of council officers logging complaints but never calling back, threats of withholding rent, reports of tenants being charged £38 to replace light bulbs, and hiring solicitors to take out court orders to force the council to do repairs.

Then, there is the official voice of the Audit Commission, which last week repeated its 2001 "no stars" verdict for Birmingham council's repairs and maintenance service. The language is bureaucratic, but it does not disguise the facts: no external painting carried out in the past five years, a dangerous backlog of servicing for gas central heating and 48,000 non-urgent repairs waiting to be addressed. The catalogue concludes with the ominous option of "a direct referral to the secretary of state for intervention".

The chorus of criticism directed at the city's housing department is growing. In April 2002, the city's 86,000 council tenants overwhelmingly rejected the department's plans for stock transfer – a clear vote of no confidence. In December last year, a comprehensive performance assessment rated the housing service as one out of four. Earlier this month, an internal report conceded that subsequent targets on repairs, lettings and neighbourhood maintenance were unlikely to be achieved this year.

At the top, there is now an uneasy silence in the corridors of power. Ian Findlay, the assistant director of housing and the man in charge of repairs and capital spending, has left and is understood to be taking up a post as director of property services at Walsall Housing Group next month. Meanwhile, housing director David Thompson has just started a six-month secondment to the Local Government Association, where he will work on pushing the council housing sector's case in the comprehensive spending review.

Thompson insists there is "no connection" between his move and the publication of the progress report, and that he is looking forward to both the LGA challenge and his return to Birmingham next year. On the other hand, his back-door exit usefully disperses the backlash from the report and cynics question why the city council was able to release him at such a critical moment.

So it is now up to two interim managers, David Hucker and Michael Irvine, to deliver a new improvement plan and boost the morale of the 2000 staff who find themselves under the supervision of the housing inspectorate. But they still have to face more critics: a continuing internal audit of the repairs and maintenance budget following allegations of over-charging and fraud, and an in-depth council scrutiny review. "We look forward to scrutinising the whole housing department and bringing to light those responsible," says councillor John Lines, the Conservative housing spokesman for Birmingham.

So where did it all go wrong? Thompson, speaking from the LGA and choosing his words carefully, says the transfer ballot and its aftermath were a "distraction from our focus on the performance improvement plan" put in place after the first Audit Commission report in August 2001. Certainly, if one were kindly disposed to Birmingham, one could say it had been caught between delivering a service tenants can be proud of today and the strategic upheaval necessary to reach the decent homes standard tomorrow.

But if one were being unkind, one could say management had its eyes so firmly fixed on strategies such as the implementation of the recommendations of the independent commission set up in the wake of the transfer "no" vote that they neglected the less glamorous world of repairs, maintenance, voids and lettings. "All these issues get buried in broad plans, and front-line staff don't feel empowered to resolve them," says one senior housing figure. "There are no incremental improvements while everyone's waiting for the Big Bang."

The independent commission refers to housing capital budgets being "top-sliced" to fund major city projects; in December 2002, a peer review report from the Improvement and Development Agency paints a picture of an administration obsessed with education and improving the public face of Birmingham. Yes, it has a glittering new Bull Ring – but it is tarnished by the problems of the city's council housing.

Other problems are located firmly in the housing revenue account. The specific crisis in the repair and maintenance service seems to have begun several years ago, when Birmingham ran an in-house direct labour organisation. By June 2000, when Thompson arrived in Birmingham, significant losses were already being incurred. By April 2001, the service was contracted out, with two companies, Serviceteam and Accord, winning the £375m deal and taking on the DLO's staff.

However, dismantling the unwieldy, centralised DLO to replace it with the two contracts was a bad move, property consultant FPD Savills told the independent commission. The contracts proved to be difficult to manage and insensitive to local issues. Thompson says "turning around a service of this scale requires significant time, longer than the two-year interval", but part of the problem seems to be that the council had simply cut one Titanic into two.

London School of Economics professor Anne Power, who led the independent commission, recalls a repairs and management service "in crisis". "Birmingham's client management of the repairs budget was extremely weak. Repairs were running way ahead of budget. Having privatised the service, they were still in the same position of running out of money.

It was clear the repairs service was heading for a lot of trouble, and nothing we could have said would have changed it."

Culture shock
Lack of accountability and lax management control created a breeding ground where allegations of invoice inflation and fraud could flourish. Councillor John Hemming, leader of the Liberal Democrat group, describes "a culture of petty theft" and "massive overcharging". "I don't see why tenants should pay for that kind of mismanagement," he says. The Conservatives' John Lines refers to "horror stories of work being charged for and not being done" which will form part of the scrutiny review.

But if Birmingham was underspending on repairs, it was spending far too much on management. The commission's report revealed that Birmingham spent half its management and maintenance budget on management, when government guidelines suggest a norm of just 35%. But despite a target of reducing management costs by £12m last year, it only managed to find £5m in savings. Now, at £14 per week per house, management costs are among the highest in the country.

Over-centralisation and a top-heavy management structure within the housing service seems to be another symptom of a wider "we know best" culture of old-fashioned municipalism within Birmingham council. The IDeA peer review report criticises council-wide resistance to new procurement and management methods, poor human resources policies and internal communications, a lack of willingness to learn from other councils, and a tendency to pay lip-service to consultation with tenants and residents.

"Birmingham had been run on traditional local authority lines for a number of years, and had not caught up with best practice," says Tom Murtha, chief executive of Keynote Housing Group, pointing to the council's low investment in call-centre technology and IT that would have helped tenants to contact their housing department more easily. Residents' surveys quoted in the IDeA report show a decline in customer satisfaction with the accessibility of the service after the no-star report in August 2001, and that 60% of tenants who made complaints were dissatisfied with the way they were handled.

"The housing department had a long history of remote-control management," says one neighbourhood activist, who has stories of estates where residents mobilised to tackle crime, grime and drugs, and "the municipal authority trailed along after". "We're talking about poor environments, a slow inadequate repairs service, and a lack of ability to affect quality of life. It's too centralised, it's difficult for staff to get a grip on the situation. It needs to be broken down into smaller, self-contained units."

And that's exactly what Birmingham is now trying to do. It currently has two pathfinders, each covering 8000 homes, setting about implementing the independent commission's recommendations. This called for the creation of 35 community-based housing organisations, which could choose different levels of autonomy, generate investment by pursuing arm's-length management organisations or other partnership funding, and control up to 80% of the management budget and 100% of the repairs budget. "It's about driving the housing revenue account down to neighbourhood level," says Power.

Meanwhile, new chief executive Lin Homer has launched a strategy of devolving all council services, including housing management, to 11 constituencies. At the same time, 40 localities, covering 18,000 homes, are undertaking section 16 option studies – the ODPM consultations that ask tenants how they can get involved with the management of their homes.

"Devolution and the community-based housing organisation process are a framework for taking the issue forward in a way that meets tenants' requirements," says Keynote chief Tom Murtha. "As it flows through, it should bring improvements in the services. That's how we should see it."

Fuel for the fire?
But while there is much support for the community housing organisations and devolution in the city's housing, some also see the potential for another disastrous dispersal of management focus. Richard Clark, chief executive of Prime Focus Regeneration Group, is concerned that the city could again be at risk of getting its priorities wrong. "The Audit Commission report shows that Birmingham needs to give a high priority to housing and not lose its focus when the emphasis is on devolution and the current staff changes," he says.

There is also a risk that tenants' low confidence in the repairs and maintenance service could contaminate the new strategic agenda. "In order to deliver extra investment through any route, the organisation needs to have an efficient, reliable, day-to-day repairs service. To have confidence in your ability to deliver kitchens and bathrooms, they need confidence you can re-washer a tap properly," says Karl Tuppling, head of housing strategy at Sheffield council.

So can Birmingham turn around its repair and maintenance service and still stay focused on the ambitious, agenda-setting community-based housing organisations? Power believes that "as long as it keeps a steady nerve, it should be able to make a lot of progress". At the LGA, Thompson talks of service improvement "as rapidly as possible" and tenants' strong appetite for community-based organisations and devolved government. But the real verdict lies with the tenants – particularly as they take on more power through the community-based housing strategy, the true judgement of Birmingham's success or failure in turning around its shameful history will come from this 86,000-strong jury.