Labour-run Birmingham City Council declares itself ‘effectively BANKRUPT’ after being hit with £760m bill to settle equal pay claims – as officials blame ‘rampant inflation’ for ‘going bust’
Labour-run Birmingham City Council declares itself ‘effectively BANKRUPT’ after being hit with £760m bill to settle equal pay claims – as officials blame ‘rampant inflation’ for ‘going bust’
Labour-run Birmingham City Council has declared itself effectively bankrupt after being hit with a £760million bill to settle an equal pay claim.
The city council – which is Europe’s biggest local authority – has issued a Section 114 notice blocking it from spending on anything but essential services.
The local authority said it was forced to declare bankruptcy due to facing a £650million- £760million bill relating to equal pay claims.
The council said it lacks sufficient resources to pay the bill, which is currently accruing at a rate of £5million to £14million a month.
Councilors from the local authority blamed the situation on ‘huge increases in adult social care demand… dramatic reductions in business rates’ and ‘rampant inflation.’
The bankruptcy means all services apart from statutory services and those that protect vulnerable people will stop immediately.
In 2012, Birmingham City Council was ordered to pay compensation to 170 of its former employees, over claims the local authority breached quality laws.
The lawsuit left the council facing a £760million bill to settle the claims, following a Supreme Court ruling that hundreds of mostly female staff had missed out on bonuses.
In a statement posted on Bimringham Live, the local authority 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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