Birmingham City Council 'effectively bankrupt'

5 September 2023, 11:22 | Updated: 5 September 2023, 11:27

Birmingham City Council has formally declared itself in financial distress
Birmingham City Council has formally declared itself in financial distress. Picture: Alamy

By Asher McShane

Birmingham City Council has declared itself effectively bankrupt and will only allow spending on core services.

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The council has issued a Section 114 notice that prevents all but essential spending.

In June the council entered talks with the government after revealing it has to pay up to £760m to settle equal pay claims.

In a statement, the local authority said: "The Council will tighten the spend controls already in place and put them in the hands of the Section 151 Officer to ensure there is complete grip. The notice means all new spending, with the exception of protecting vulnerable people and statutory services, must stop immediately.

"The council's senior officers and members are committed to dealing with the financial situation and when more information is available it will be shared."

A spokesman said: "Birmingham City Council has issued a s.114 Notice as part of the plans to meet the Council’s financial liabilities relating to Equal Pay claims and an in-year financial gap within its budget which currently stands in the region of £87m.

"In June the Council announced that it had a potential liability relating to Equal Pay claims in the region of £650m to £760m, with an ongoing liability accruing at a rate of £5m to £14m per month.

"The Council is still in a position where it must fund the equal pay liability that has accrued to date (in the region of £650m to £760m), but it does not have the resources to do so.

"On that basis the Council’s Interim Director of Finance, Fiona Greenway, (s.151 – Chief Finance Officer) has issued a report under section 114(3) of the Local Government Act, which confirms that the Council has insufficient resources to meet the equal pay expenditure and currently does not have any other means of meeting this liability.

"The Council will tighten the spend controls already in place and put them in the hands of the Section 151 Officer to ensure there is complete grip. The notice means all new spending, with the exception of protecting vulnerable people and statutory services, must stop immediately.

"The Council’s senior Officers and Members are committed to dealing with the financial situation and when more information is available it will be shared."

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