Birmingham city council declared bankruptcy. UK’s second-largest city’s situation explained

    England’ second largest city Birmingham‘s city council on 5 September, declared itself bankrupt, putting a pause on all spending except essential ones. The Birmingham city council issued a 114 notice last Tuesday, thereby joining a string of local authorities, which include Woking, Croydon, and Thurrock, that have announced it did not have the resources to balance its books, the United Kingdom that is now living “hand to mouth”.

    So far the Conservative party Prime Minister Rishi Sunak-led government has refused to come to the Birmingham City Council’s rescue. The government had already provided extra funding for the council, at around 10 percent of its budget, but ”it’s for locally elected councils to manage their own budgets,” Prime Minister Rishi Sunak’s spokesman Max Blain told reporters.

    What is notice 114?

    A Section 114 notice is issued by a city council when it believes its income will not be able to meet spending. Thurrock, Croydon, Slough, Woking, and Northamptonshire have all issued Section 114 notices in recent years.

    The notice means all but essential spending will be halted, in order to protect core services.

    How Birmingham city council reach bankruptcy?

    -Most local reports have put blame of bankruptcy o for England’s second largest city on demands of equal pay by the female residents of the city. The Labour-led council in Birmingham had estimated in July that equal pay claims brought by its female staff could cost it up to £760m (over 78 Billion).

    In June, the council revealed it had paid out 1.1 billion pounds to female workers but still had a current liability of 650-750 million pounds, accruing at a rate of 5 million pounds to 14 million pounds a month.

    -According to Daily Mail, Birmingham city council spent millions on a ‘botched IT system’ by Oracle. The IT system was supposed to cost 19 million pounds, but after three years of delays in getting it in place and problems once it was installed mean it is now expected to cost 100 million pounds.

    -Birmingham city council also spent another £184 million on its costly bid to stage the Commonwealth Games last year.

    Birmingham city council raked in close to £90 million from its controversial Clean Air Zone – only to pump more than £50 million back into hydrogen buses and cycle lanes, the report further stated.

    -Other costs include a £13 million investment in the 2026 European Athletics Championship, as well as unrevealed outlays on a series of ‘inclusive’ street signs and an ambitious ‘Green roads’ plan.

    -Inflation, rising demand for adult social care, and ”dramatic reductions” in income from business taxes are being touted as the reasons behind the crisis.

    Birmingham equal pay controversy

    As per BBC, in 2012 a group of 170 women – including teaching assistants, cleaners, and catering staff – won the right to proceed with equal pay claims against the council at the Supreme Court. They claimed that the council failed to provide them with the same benefits and payments as men doing equivalent work.

    Financial crisis city councils in UK are facing

    According to a Guardian report, Local Government Association (LGA) estimates that councils face a £3bn funding gap over the next two years to maintain services at current levels.

    Services Birmingham city council currently runs

    -Adult Education Service

    -Ageing well services

    -Parks, leisure and wellbeing

    -Supporting healthier lives

    -Voluntary and community health and care services in Birmingham

    Birmingham City Council will now have to prioritise core services, while other services across the city lose the funding they rely on.

    ”The Council has insufficient resources to meet the equal pay expenditure and currently does not have any other means of meeting this liability. The notice means all new spending, with the exception of protecting vulnerable people and statutory services, must stop immediately,” the Birmingham City Council said in a statement.

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