The £621 Million Question, And The Names Behind It
For a decade, Birmingham was told its share of the West Midlands Pension Fund carried a substantial deficit. Was this true ?
Midlands GRIT, 17 February 2026
There are rows in local government. And then there are slow burn reckonings.
What Professors John Clancy and David Bailey have been setting out over recent days is not a minor technical disagreement about actuarial modelling. It is a challenge to the entire narrative that has underpinned Birmingham’s financial collapse.
Clancy and Bailey have argued, repeatedly and in detail, that the so called pension deficit which drove hundreds of millions of pounds out of Birmingham City Council’s revenue budget simply did not exist in the way it was presented.
That is a staggering claim.
And if they are right, the consequences reach far beyond spreadsheets.
What Clancy and Bailey Are Saying
Clancy and Bailey’s core case is clear.
For a decade, Birmingham was told its share of the West Midlands Pension Fund carried a substantial deficit. As a result, the council was required to make specific “deficit reduction” payments, known as secondary contributions.
Over ten years, those payments totalled around £439 million.
At the same time, employer contribution rates were set higher than they might otherwise have been because the underlying actuarial assumptions overstated liabilities.
So Birmingham was squeezed twice.
Clancy and Bailey have gone back through the numbers. Using the fund’s own revised approach, particularly the acceptance of roughly 6.5 percent annual investment growth, they argue that in each of those years the assets were sufficient to meet long term liabilities.
In some years, more than sufficient.
That matters. Because if assets exceed liabilities, the word deficit starts to lose its meaning.
The Surplus That Emerged
Fast forward to 2026 and Birmingham’s share of the fund now shows a surplus in excess of £3 billion.
Clancy and Bailey have been explicit. They distinguish between what might be called a primary surplus and a secondary surplus.
The secondary surplus, in their framing, is the £439 million paid explicitly to reduce a deficit that may never have existed.
But it does not stop there.
If the fund was earning approximately 6.5 percent annually, those additional contributions would themselves have generated returns. Clancy and Bailey calculate those returns at around £180 million.
That produces a combined figure of roughly £621 million.
Six hundred and twenty one million pounds.
That is the scale of what they say should be returned.
The Uncomfortable Question
Here is where this becomes sharper.
Clancy and Bailey have not been raising these concerns for the first time this month. The historical evidence on long term Local Government Pension Scheme returns has been available for years. The data was not hidden.
If that evidence supported higher discount rates, if it undermined the narrative of chronic deficit, then those running the West Midlands Pension Fund would have known that.
Which leads to a difficult question.
Did the fund’s leadership genuinely believe the assumptions were correct, or did they persist with an overly cautious approach long after evidence suggested otherwise?
If the latter, then the consequences were not abstract.
Those decisions contributed to hundreds of millions of pounds leaving Birmingham’s revenue budget. They coincided with the closure of services, reductions in staffing and the eventual declaration of effective bankruptcy.
That is not theoretical harm. That is lived reality.
Clancy and Bailey have effectively said the emperor had no clothes. The figures, they argue, show that the supposed deficit was an artefact of modelling choices.
If so, culpability cannot simply evaporate.
Can This Just Drift Away?
There is a danger in public finance scandals that they dissolve into technical fog.
Actuarial discount rates. Prudence margins. Funding strategy statements.
The language is dense enough to suffocate outrage.
But strip it back.
If a council is told to pay £439 million to fix a hole, and the hole turns out not to have been there, then someone made decisions that had enormous real world consequences.
Are those individuals simply going to walk away on enhanced reputations and comfortable pensions of their own?
Or does this moment demand something more?
Clancy and Bailey have already argued that the consultation process with employers within the West Midlands Pension Fund should be reopened. They have suggested that Birmingham should seek a large negative secondary contribution, effectively a refund.
That is the financial remedy.
But governance is the deeper issue.
A New Governance Model?
The Local Government Pension Scheme was designed to provide stability, not volatility. Yet Birmingham experienced contribution pressures so severe they formed part of a wider collapse.
If the system allows assumptions to be set in ways that generate artificial deficits, with minimal external challenge, then the system itself requires scrutiny.
Should there be stronger independent oversight of actuarial assumptions?
Should employer representatives have enhanced rights to challenge funding strategies before they are locked in for years?
Should there be clearer accountability for decisions that materially damage public finances?
These are not calls for scapegoating. They are calls for reform.
A governance model in which senior figures can preside over decisions that cost taxpayers hundreds of millions, without transparent examination, is not sustainable.
Many residents will understandably ask whether those responsible for the deficit narrative should face public scrutiny in a formal setting. Not a quiet internal review. A real one.
Elections and Reckoning
Local elections are approaching.
Clancy and Bailey have put the issue squarely on the table. They have done the forensic work. They have traced the flows of money. They have asked why assumptions were not aligned with long term evidence.
Now it moves from the actuarial to the political.
£621 million is not marginal. It could restore services. Stabilise budgets. Reset Birmingham’s trajectory.
The public will want to know who knew what, and when.
They will want to know whether the pension fund’s leadership was merely cautious or materially negligent in persisting with assumptions that proved so costly.
And they will want to know what changes are coming to ensure it cannot happen again.
Because this is no longer just about Clancy and Bailey’s spreadsheets.
It is about accountability.
If hundreds of millions were extracted from Birmingham on the basis of a deficit that did not truly exist, then this is not a technical footnote in public finance.
It is a turning point.
And the question hanging over Wolverhampton and Birmingham alike is simple.
Will those responsible be allowed to shrug and move on?
Or is their day of reckoning coming too?