Birmingham Faces Financial Crisis as $954 Million in Equal Pay Claims Push City Council to Brink of Bankruptcy
Birmingham City Council has declared itself effectively bankrupt due to equal pay claims totaling $954 million. Non-essential spending has been halted, causing concerns about the impact on crucial services.
Birmingham, the second-largest city in Britain, has declared itself effectively bankrupt after being hit with equal pay claims totaling up to $954 million. The Birmingham City Council has filed a Section 114 notice, stopping all non-essential spending except for vital services. The council cited a negative general fund position due to the cost of settling equal pay claims as the reason for the financial crisis.
🇬🇧 Birmingham, the second largest city in Little Britain, has filed for bankruptcy - The Guardian
— Megatron (@Megatron_ron) September 6, 2023
"The council's head of finance took the dramatic decision on Tuesday to issue a section 114 notice, indicating that it did not have the resources to balance its books" they wrote.… pic.twitter.com/aKwjUynA9B
The claims alleged that hundreds of mainly female employees in roles such as teaching assistants and cleaners were denied bonuses given to traditionally male-dominated roles. The potential cost of the claims is estimated to be between £650 million and £760 million. The council, which provides services for over one million people, had already been in talks with the government after revealing the need to pay off the equal pay liability. Birmingham City Council's financial crisis has also been attributed to the staggering cost of implementing its Oracle IT system, which was initially budgeted at £19 million but is now expected to cost up to £100 million.
Concerns have been raised about the impact of the financial freeze on crucial services such as roads, parks, libraries, and cultural projects. The council has assured that essential services like children's safeguarding, social care, and waste collection will continue, but many fear that the cuts will have a significant impact on residents. The Mayor of the West Midlands has called for an investigation into the council's governance and handling of the equal pay issue. The council has paid out almost £1.1 billion in equal pay claims since the case was brought against them in 2012.
Birmingham City Council has become the latest local authority to issue a Section 114 notice, after other councils like Croydon and Thurrock. While local authorities in the UK cannot go bankrupt, the notice signifies a declaration of financial distress and an inability to balance the budget. The council will work with the government to determine an approach to financing the equal pay liability.
