City council declares itself 'effectively bankrupt'
Birmingham Council has issued a section 114 notice, effectively declaring itself as bankrupt after being hit by a huge equal pay bill.
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.
The local authority had been hit with a bill of between £650 million and £760 million for its equal pay liability in June, which prompted a spending freeze and an apology from the council for the failure to get the situation under control.
In a statement, the council said: "Today’s issuing of a Section 114 Notice is a necessary step as we seek to get our city back on a sound financial footing so that we can build a stronger city for our residents.
"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.
"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."
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.
The Birmingham Conservative opposition group posted a message about the notice, criticising the council for what they described as a failure.
Robert Alden, the leader of the Conservative opposition, said: "Labour's failure in Birmingham has become clear for all to see, 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.
"Combined with Birmingham Labour’s refusal to deal with equal pay over the last decade this has created this mess where residents will now lose valuable services and investment".
