Birmingham City Council Declares Themselves Effectively Bankrupt
Image source: Rapid Formations
Birmingham Council has declared itself effectively bankrupt.
The news comes following the council issuing a Section 114 notice to protect their core services by allowing only essential spending to continue. The issuing of the notice means that the local authority has deemed itself unable to balance their budget and that they are in a position of financial distress, which has been linked to a £760m bill settling equal pay claims. Their financial issues have also been linked to government cuts over the past decade and issues with their new Oracle IT system, which after 3 years of delays could potentially cost up to £100m rather than the original £19m that was stated.
Birmingham city council had already stopped non-essential spending in July following the revelation that they still faced the equal pay claims bill, however concerns have arisen over how this has occurred with Andy Street, the Mayor of the West Midlands calling for an inquisition into the situation. It has been acknowledged by Downing Street that the declaration of financial distress could be concerning for Birmingham residents, with the prime minister's spokesperson stating that “clearly it’s for locally elected councils to manage their own budgets” and that the government had “requested assurances from the leader of the council about the best use of taxpayers money”. An extraordinary meeting is due to be held on 26th September and negotiations with the government's Department for Levelling Up, Housing and Communities (DLUHC) are set to continue to establish an approach for paying the equal pay claims.
The Section 114 notice means that no new spending will be approved, apart from for the maintenance of statutory services such as road maintenance, waste collection, social care and education, and the protection of vulnerable people. Current commitments and contracts will also continue to be honoured under this notice. Richard Parker, the Labour candidate for the West Midlands mayor has said “The Labour party has put in place a new leadership team who have my full support and who are working hard to turn around the council and deliver for residents.”
BBC News - https://www.bbc.co.uk/news/uk-england-birmingham-66715441
The Guardian - https://www.theguardian.com/society/2023/sep/05/birmingham-city-council-financial-distress-budget-section-114