1. Governance
September 5, 2023

Birmingham City Council effectively declares bankruptcy

Birmingham City Council issues a notice amid a budget shortfall and escalating equal pay claims.

By City Monitor Staff

In a move to address its dire financial situation, Birmingham City Council has issued a Section 114 (s.114) Notice, signalling a state of emergency regarding its financial stability – effectively stating bankruptcy. This drastic step is part of the council’s plan to grapple with mounting Equal Pay claims and an in-year financial gap currently estimated at a staggering £87m.

Birmingham bankrupt
Has Birmingham gone bankrupt? (Photo by Clare Louise Jackson/Shutterstock)

Back in June, Birmingham City Council had already sounded the alarm by revealing its potential liability related to Equal Pay claims, ranging between £650m to £760m, with an ongoing liability accruing at an alarming rate of £5m to £14m per month.

Despite the gravity of the situation, the council finds itself in a position where it must fund the Equal Pay liability that has accrued to date – somewhere in the daunting range of £650m to £760m. Unfortunately, the council does not possess the necessary financial resources to meet this colossal liability.

Birmingham bankruptcy

Fiona Greenway, the council’s interim director of finance and s.151 chief finance officer, has taken action by issuing a report under section 114(3) of the Local Government Act. This report confirms that Birmingham City Council is currently grappling with insufficient resources to meet the burgeoning Equal Pay expenditure, and it lacks alternative means to address this monumental liability. Again, this effectively states bankruptcy.

In light of this financial crisis, the council has embarked on a strict regimen of cost control measures. All new expenditures, with the exception of essential services focused on protecting vulnerable individuals and statutory services, are now mandated to cease immediately. This move aims to regain complete control over the council’s financial situation and avoid further deterioration.

The council’s senior officers and members have expressed their commitment to resolving this dire financial crisis. They have pledged to provide more information as it becomes available, demonstrating a transparent approach to managing this financial emergency.

Birmingham City Council’s issuance of the s.114 Notice serves as a stark reminder of the critical financial challenges faced by local authorities across the UK.

Birmingham’s residents will be watching closely, hopeful for a resolution that preserves the city’s fiscal health and the well-being of its citizens to avoid bankruptcy.

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