Birmingham, Britain’s second-largest city, declared bankruptcy on Tuesday. The announcement was followed by a notice to suspend all non-essential spending after being charged equal pay claims of £760 million (around $954 million).
The city joins other UK councils like Thurrock, Northamptonshire, Slough, Woking, and Croydon in declaring bankruptcy. However, unlike other city councils that increased taxes to resolve deficit issues, the Birmingham City Council plans to protect core services from the impact of the bankruptcy.
Birmingham City Council, which delivers services to over one million people, filed a Section 114 notice, indicating that the city’s income and expenditure were not aligning, and immediately halting all non-emergency spending to protect “vulnerable people and statutory services.”
“This is one of the biggest challenges this council has ever faced, and we apologize for the failure to get this situation under control,” the council said, adding that it was communicating with external auditors to find “possible solutions.”
The city is experiencing a deficit due to challenges paying between £650 million (around $816 million) and £760 million (around $954 million) in equal pay claims. Birmingham City currency expects to undergo a deficit of £87 million (approximately $109 million) for the 2023-24 financial year.
Sharon Thompson, deputy leader of the council, said the city faces “longstanding issues, including the council’s historic equal pay liability concerns.” She also partly blamed the UK’s ruling Conservative Party, claiming “successive Conservative governments” took away funding worth £1 billion.
“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,” she added.
Many local reports have put the onus of bankruptcy on demands of equal pay by the city’s female residents. According to Birmingham City Council’s estimates, the equal pay claims issued by female staff could cost up to £760m (over ₹78 Billion).
In June, the council revealed paying £1.1 billion to female workers but still incurring losses of £650 million to £750 million., which is around £5 million to £14 million monthly.
However, Sharon Thompson announced that despite facing deficit challenges, Birmingham City is accepting and open for businesses and is “welcoming people as they come along.”
A spokesperson at UK PM Rishi Sunak’s office claims the responsibility of managing budgets lies on locally elected councils. The spokesperson added that the government has been regularly engaging with the Birmingham City Council 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.”
John Cotton, Birmingham City Council’s leader, said the council would unveil a new jobs model to handle the equal pay claims bill.
The Secretary of State for Levelling Up, Michael Gove, responded to the bankruptcy declaration by announcing plans to appoint commissioners to take over Birmingham City Council and start a local investigation to understand the root problem of the deficit.
Birmingham, also known as England’s multicultural city, was the hub for the 2022 Commonwealth Games and is scheduled to host the European Athletics Championships in 2026.