Birmingham City Council effectively bankrupt owing over £650m
Birmingham City Council has issued a Section 114 Notice, effectively declaring itself bankrupt.
In June, the council announced that it had a potential liability regarding equal pay claims in the region of between £650m and £760m.
Then in July, the local authority – which is the largest in Europe – made a decision to halt all non-essential spending.
Birmingham City Council has paid out over £1bn in equal pay claims since 2012 after the Supreme Court ruled in favour of 174 – mostly female – council employees who were passed over for bonuses given to members of staff in traditionally male-dominated roles.
These claims have continued to accrue at a rate of £5m to £14m per month.
Despite this, the local authority said its budget currently only stands in the region of £87m.
Birmingham City Council said it is still in a position where it must fund the equal pay liability, but does not have the funds to do so.
A Section 114 Notice confirms that the council has insufficient resources to meet the equal pay expenditure and currently does not have any other means of meeting this liability.
The notice means that the council, with some limited exceptions, must halt all new spending immediately.
Birmingham City Council leader John Cotton and deputy leader Sharon Thompson said: “Like local authorities across the country, it is clear that Birmingham City Council faces unprecedented financial challenges, from huge increases in adult social care demand and dramatic reductions in business rates income, to the impact of rampant inflation.
“We implemented rigorous spending controls in July, and we have made a request to the Local Government Association for additional strategic support.
“[The] issuing of a Section 114 Notice is a necessary step as we seek to get our city back on a sound financial footing so that we can build a stronger city for our residents.
“Despite the challenges that we face, we will prioritise core services that our residents rely on, in line with our values of supporting the most vulnerable.”
Michelle McCrossen, an organiser at GMB Union, which is Birmingham City Council’s largest staff union, described the announcement as a “humiliating admission of failure on part of [the council’s] officials and leadership.”
She added: “Not only are they responsible for creating this crisis through years of discriminating against their own staff, but even they no longer believe themselves capable of fixing it.
“For decades the council has stolen wages from its low-paid women workers, running up a huge equal pay liability that has brought Birmingham to the brink.
“Due to the reckless incompetence of council bosses, thousands of city employees will be worrying for the future of their jobs and of the essential services that they provide for the people of Birmingham.
“GMB will continue to fight for pay justice for our members, and to ensure those responsible for this crisis are held to account.”