Birmingham's fiscal struggles declares itself bankrupt
Birmingham's fiscal struggles: Halting non-essential spending amidst mounting Equal Pay claims
Birmingham, the second-largest city in the United Kingdom, has taken a drastic step by cutting off all non-essential spending due to mounting equal pay claims, which have soared to a staggering 760 million euros ($954 million). This financial crisis has led the city to anticipate a deficit of 87 million euros ($109 million) for the upcoming 2023-24 financial year, according to CNN reports.
Birmingham's financial crisis
On Tuesday, the Birmingham City Council made a significant move by issuing a Section 114 notice, effectively putting a halt to all expenditures except those related to essential services. The primary reason behind this drastic decision is the council's immense challenge in addressing equal pay claims, which range from 650 to 760 million euros.
Root causes of the crisis
The city's financial woes have been building up over the years due to several factors. Birmingham has been grappling with a rising demand for social care services, a decrease in income from business rates, and the impact of inflation. The crisis can be traced back more than a decade when approximately 5,000 female council employees won a legal case for equal pay in 2010. They argued that they were not receiving bonuses that were typically granted to male counterparts, as reported by BBC.
Since that landmark case, the Birmingham City Council has disbursed nearly 1.1 billion euros in equal pay claims, with the bill increasing by a staggering 14 million euros each month. To compound the situation, the city's new IT system, managed by Oracle and responsible for payments, data management, and background checks, encountered significant issues. Originally budgeted at 19 million euros, delays of three years have inflated the cost to approximately 100 million euros.
Section 114 notice
The Section 114 notice signifies that Birmingham lacks the financial means to meet its growing liabilities and is unable to commit to any new expenditures. Furthermore, the city faced criticism for proceeding with hosting the Commonwealth Games in 2022 despite its ongoing financial difficulties.