The second-largest city in Britain essentially declared bankruptcy by ceasing all non-essential spending after receiving equal pay claims for up to £760 million ($956 million). Birmingham City Council, which serves more than a million people, submitted a Section 114 notice on Tuesday, suspending all expenditures save from those for essential services.
According to the notice report, the deficit resulted from difficulty paying equal pay claims totaling between £650 million (about $816 million) and £760 million (around $954 million).
The deficit resulted from difficulty paying equal pay claims totalling between £650 million (about $816 million) and £760 million (around $954 million).
For the fiscal year 2023–2024, the city now anticipates a deficit of £87 million ($109 million).
According to the UK’s PA Media news agency, the council confronts “longstanding issues, including the council’s historic equal pay liability concerns,” as deputy leader Sharon Thompson informed councilors on Tuesday.
“Local government is facing a perfect storm,” she said. “Like councils across the country, it is clear that this council faces unprecedented financial challenges, from huge increases in adult social care demand and dramatic reductions in business rates incomes to the impact of rampant inflation.”
A spokesperson for UK Prime Minister Rishi Sunak told reporters on Tuesday: ‘
“Clearly it’s for locally elected councils to manage their own budgets.” The spokesperson added that the government has been “engaging regularly with them to that end and has expressed concern about their governance arrangements and has requested assurances from the leader of the council about the best use of taxpayers’ money.”
The Birmingham City Council
The representing group issued a warning in July that councils were finding it difficult to meet the rising demand for the fundamental services they were mandated by law to provide while simultaneously maintaining financial stability.
Birmingham revealed last month that it would have budget deficits of £87.4 million for 2023–2024 and £164.8 million for 2024–2025.
The city council has pledged to reduce spending to only the most essential services by filing a section 114 notice in exchange for support from the UK government in stabilizing the financial situation. In recent months, other councils, such as Thurrock and Woking, have been compelled to take the same action.
The UK inflation rate has moderated marginally from a peak of 7.2%, according to the most recent data from the Office for National Statistics (ONS), providing consumers and policymakers with some cause for optimism. Inflationary pressures have been reduced by factors such as stabilized energy prices and declining global commodity costs.
While this moderation might temporarily ease families’ financial problems, experts advise against overindulging in celebrations. The headline inflation rate is still significantly higher than the Bank of England’s objective, necessitating ongoing monitoring and potential intervention.