Britain's Second-Largest City Essentially Declares Insolvency Amidst $950 Million Equal Pay Lawsuits
On Tuesday, Britain's second-largest city, Birmingham, took the drastic step of effectively declaring bankruptcy by implementing a halt on all nonessential expenditures. This move comes in the wake of staggering equal pay claims amounting to as much as £760 million ($956 million).
Birmingham City Council, responsible for delivering essential services to over a million residents, issued a Section 114 notice on Tuesday, effectively freezing all spending except for vital services.
The financial crisis at hand is primarily attributable to the challenge of meeting equal pay claims ranging from £650 million (approximately $816 million) to £760 million (approximately $954 million), as outlined in the notice report.
For the upcoming 2023-24 financial year, the city anticipates a deficit of £87 million ($109 million).
Sharon Thompson, the deputy leader of the council, addressed council members on Tuesday, highlighting the city's long-standing issues, particularly the historic burden of equal pay liabilities. She also attributed part of the financial strain to actions by the UK's ruling Conservative Party, asserting that Birmingham had suffered a significant reduction in funding, amounting to £1 billion, under successive Conservative governments.
"Local government is grappling with an unprecedented convergence of challenges," she commented. "Just like councils nationwide, this council is contending with remarkable financial pressures arising from a substantial surge in demand for adult social care, sharp declines in business rates revenue, and the repercussions of soaring inflation."
"Despite these formidable challenges, it's important to emphasize that the city remains open for business, and we continue to extend a warm welcome to all," she further affirmed.
A spokesperson representing UK Prime Minister Rishi Sunak conveyed to reporters on Tuesday, "Clearly, the management of their budgets falls under the purview of locally elected councils."
The spokesperson went on to note that the government has maintained regular engagement with these councils, expressing concerns about their governance practices and seeking assurances from the council's leader regarding the prudent utilization of taxpayers' funds.
The council's leader, John Cotton, also mentioned to the BBC that a new employment model would be implemented within the council to address the substantial equal pay claims liability.