Britain’s second-largest city, Birmingham, has taken the drastic step of effectively declaring bankruptcy by ceasing all nonessential spending.
This decision came in response to a significant financial burden caused by equal pay claims, amounting to a staggering £760 million ($954 million).
Birmingham City Council, responsible for serving over one million residents, officially issued a Section 114 notice on Tuesday, effectively putting a halt to any spending beyond essential services.
The financial predicament arose due to difficulties in meeting equal pay claims ranging from £650 million (approximately $816 million) to £760 million (around $954 million), as reported in the notice. As a result of these challenges, the city now anticipates facing a deficit of £87 million ($109 million) for the upcoming 2023-24 financial year.
Sharon Thompson, deputy leader of the council, told councilors on Tuesday it faces “longstanding issues, including the council’s historic equal pay liability concerns,” according to the United Kingdom’s PA Media news agency.
Thompson also blamed in part the UK’s ruling Conservative Party, saying Birmingham “had £1 billion of funding taken away by successive Conservative governments.”
“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.”
“Whilst the council is facing significant challenges, the city is very much still open for business and we’re welcoming people as they come along,” she added.
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 council’s leader John Cotton elsewhere told the BBC that a new jobs model would be brought into the council to tackle the equal pay claims bill.
The multicultural city is the largest in central England. It hosted last year’s Commonwealth Games, a major sporting event for Commonwealth countries, and is scheduled to hold the 2026 European Athletics Championships.
