The existing contract that sees Service Birmingham – the joint venture between the city council and Capita – provide ICT support and contact centre services will now be extended from 2016 to 2021.

As well as generating £135 million of gross savings for the council over the next ten years, the deal will see Service Birmingham improve council tax collection rates from 96.3 per cent to 98 per cent by 2017, which would represent an increased annual income of £4.8 million.

As part of the new deal, 132 revenue services employees will transfer from the city council to Service Birmingham from April this year under TUPE regulations.

Announcing the decision, Councillor Randal Brew, Cabinet Member for Finance said: “Our relationship with Capita through Service Birmingham has been a successful one, as we have begun to modernise services despite this being a huge challenge for an organisation that had previously done things in traditional ways for a very long time. We need to keep this momentum up over the coming years and the proposals will do this.”

Paul Pindar, chief executive of The Capita Group Plc, added: “We are delighted to be signing this new contract with Birmingham City Council. The long-term partnership between the city council and Capita is at the heart of this deal. We have already helped the council achieve considerable savings while improving service quality to their customers. This extension will help us to continue to do so.”

Welcoming the new deal, Service Birmingham chief executive, Stewart Wren added: “It’s a vote of confidence in the work our staff have put in to improve the council’s ICT function since 2006 and to turn the contact centre into one of the very best in local government.

“We will deliver what we promise and provide even greater service and value for money for the people of Birmingham.”