Birmingham City Council, the UK’s largest council has issued a section 114 notice, declaring itself bankrupt as it cannot balance its budget without financial assistance.
Birmingham City Council
Birmingham City Council has issued a Section 114 notice symbolising an admission of bankruptcy. A section 114 notice, issued in the past by councils including Croydon and Thurrock, means no new expenditure is permitted, with the exception of funding statutory services, and existing commitments and contracts.
In a statement, the leader and deputy leader of the Labour-run council, John Cotton and Sharon Thompson, said the notice was “a necessary step as we seek to get our city back on a sound financial footing”. They attributed the council’s financial crisis to “longstanding issues” including equal pay liability claims and complications from implementing a new IT system.
“We implemented rigorous spending controls in July, and we have made a request to the Local Government Association for additional strategic support,” the statement said. In addition, the council claims that “despite the challenges that we face, we will prioritise core services that our residents rely on, in line with our values of supporting the most vulnerable.”
A few days ago, Birmingham City Council launched an employee-wide resignation scheme in a bid to reduce its wage bill and tackle its financial crisis. All 10,600 of the council’s employees were invited to apply to quit under its Mutually Agreed Resignation Scheme, which was launched earlier this week.
Back in June, Birmingham City Council revealed it was in talks with the Government after facing a £760m bill to settle equal pay claims. The 2012 settlement followed a landmark court ruling which found hundreds of mostly female employees working in roles such as teaching assistants, cleaners and catering staff missed out on bonuses which were given to staff in traditionally male-dominated roles such as refuse collectors and street cleaners.
Michelle McCrossen from the GMB Union, which represents thousands of council workers, said the announcement was “shocking” and revealed the extent of pay discrimination at the council. “GMB members in Birmingham City Council have been campaigning for equal pay for years, because we believed that the council’s pay scheme discriminates against its women workers,” she said.
“The extent of the discrimination is far worse than anyone could have imagined, and it’s clear the council has learned nothing from their shameful history of undervaluing women’s work.”
The equal pay bill posed another financial blow for the council after its Oracle IT project was found to be costing £100m, five times its original budget.
Moreover, a recent report found that Birmingham City Council has more upheld complaints than any other authority in England. In one year, the council faced more complaints than in Liverpool, Manchester, Sheffield and Leeds combined. The research by the Local Government and Social Care Ombudsman found there were a total of 128 upheld complaints about the authority during the period between 1 April 2022, and 31 March 2023. That is more than every other council in England.
Birmingham’s Conservative Group hit out at the Labour administration’s “failure to take action over the last decade”. Furthermore, Robert Alden, the leader of the Conservative opposition, said: “What Labour pledged was a golden decade ahead to voters in 2022 turns out to be based on budgets in 20/21 and 21/22 that did not balance and were unfunded”.
Councillor Alex Yip described it as “financial chaos” and said the council was “unable to be trusted with the city’s finances”.
Birmingham City Council has continuously faced chaos and the extent of the crisis, along with previous controversies, shows that it is down to deep-rooted mismanagement.