Birmingham: Britain’s second largest city effectively declares bankruptcy

London
CNN
—

Britain’s second-largest city effectively declared bankruptcy on Tuesday, shutting down all non-essential spending after it was issued equal pay claims totaling 760 million pounds ($956 million).

Birmingham City Council, which provides services to more than a million people, served a Section 114 notice on Tuesday, halting all spending except for essential services.

The notice report said the deficit arose because of difficulties paying between £650m (about $816m) and £760m (about $954m) in equal pay claims.

The city now expects to run a shortfall of 87 million pounds ($109 million) for the 2023-24 financial year.

Sharon Thompson, the council’s deputy chair, told council members on Tuesday that it faces “long-standing issues, including historical concerns about liability around equal pay,” according to UK news agency PA Media.

Thompson also placed the blame in part on the UK’s ruling Conservative Party, saying that Birmingham had “taken £1 billion in funding that successive Conservative governments have taken”.

“The local government is facing a perfect storm,” she said. “Like councils across the country, this one is clearly facing unprecedented financial challenges, from massive increases in demand for adult welfare and dramatic reductions in business rate income, to The effect of rampant inflation.

“Although the council faces significant challenges, the city is still very much open for business and we welcome people when they come,” she added.

“It is clear that locally elected councils are running their own budgets,” a spokesman for British Prime Minister Rishi Sunak told reporters on Tuesday. The spokesman added that the government “deals with them regularly to this end, and has expressed concern about their management arrangements and has requested assurances from the Speaker of the Council on the optimal use of taxpayers’ money.”

Elsewhere, council leader John Cotton told the BBC that a new jobs model would be introduced to the council to tackle the Equal Pay Claims Bill.

The multicultural city is the largest in central England. It hosted the Commonwealth Games last year, a major sporting event for Commonwealth countries, and is set to host the 2026 European Athletics Championships.