Britain’s second-largest city Birmingham has declared itself bankrupt as it faces an annual budgetary shortfall of millions of pounds.
The city’s council issued a Section 114 notice on Tuesday to meet its financial liabilities, it said in a statement. A Section 114 notice means that a council is unable to meet its financial liabilities and cannot commit to new spending. After the notice is issued, the local authorities shift focus on maintaining only vital services and halting those they deem “unessential”.
The council leaders have blamed a £760 million bill for equal pay claims, problems installing a new IT system and £1 billion in government cuts for its financial problems, reported The Guardian.
In 2010, nearly 5,000 former council employees, most of whom were women, had won a case for equal pay, reported the BBC. The group did not receive bonuses given to roles that are traditionally associated with men such as street cleaners, according to the British Broadcaster.
Since then, the council has paid out over £1 billion on the equal pay claims and its £760 million bill is increasing by up to £14 million every month.
Even though bankrupt, the city has to provide statuary services, which include education, adult social care, housing services and child social care. There would be other cuts in “unessential” services but it is not clear what exactly they would be.
The city leadership run by the Opposition, the Labour Party, has pointed to reductions in business rates income and the impact of inflation on its budget. The leader and deputy leader of the council, John Cotton and Sharon Thompson, said that there has also been a huge increase in adult social care demand.
Adult social care in the United Kingdom includes personal care such as support for washing, dressing and getting out of bed in the morning, as well as wider support to help people stay active and engaged in their communities. All adults over 18 are entitled to an evaluation to determine whether they could qualify for help or support.
The UK government has said that the council being under financial stress is concerning for residents, reported The Guardian.
“The government for its part has stepped in to provide support, an additional £5.1 billion to councils in 2023-’24, which is more than a 9% increase for Birmingham city council,” said the prime minister’s official spokesperson. “Clearly it’s for locally elected councils to manage their own budgets.”
Acknowledging that Birmingham had a “particular issue around equal pay settlements”, the spokesperson said that the government has requested assurances from the leader of the council about the best use of taxpayers’ money.
Birmingham is not the first city to go bankrupt. Thurrock Council in Essex had declared bankruptcy in December.
A report published last week by the Special Interest Group of Municipal Authorities, a collective of 47 urban councils, had shown that at least 26 councils in the country were at risk of effective bankruptcy within the next two years.