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Birmingham City Council, the largest local authority in Europe, has declared itself effectively bankrupt.
Council leaders cited a £760 million bill for equal pay claims, issues implementing a new IT system, and £1 billion in government budget cuts over the past ten years as the reasons for the notice, which forbids all but essential spending to maintain core services.
The council said “it does not have the resources” to fund its equal pay liability, and has a gap in its current budget of £87m.
Intended to streamline council payments and HR systems, the flagship system was expected to cost £19m but after three years of delays it was revealed in May it could cost up to £100m.
In a joint statement, the leader and deputy leader of the Labour authority said the move was a “necessary step as we seek to get our city back on a sound financial footing”.
A Section 114 notice, previously issued by other councils including Croydon and Thurrock, means a local authority has judged itself to be in financial distress and can no longer balance its budget.
Downing Street acknowledged that the council declaring itself to be in financial distress would be “concerning” for residents.
The prime minister’s official spokesperson said: “The government for its part has stepped in to provide support, an additional £5.1bn to councils in 23-24, which is more than a 9% increase for Birmingham city council.”
