Birmingham, the UK’s second-largest city, faced a financial crisis on Tuesday as it effectively declared insolvency, stopping all nonessential spending due to substantial equal pay claims amounting to £760 million ($956 million).
The Birmingham City Council, responsible for services to over one million residents, issued a Section 114 notice, which means it’s only spending on essential services.
The financial issue arose primarily from difficulties in meeting equal pay claims ranging from £650 million (around $816 million) to £760 million (around $954 million), as stated in the notice report.
Now, the city expects a deficit of £87 million ($109 million) for the 2023-24 financial year.
Sharon Thompson, the council’s deputy leader, informed councilors that the council has long-standing problems, including historical equal pay liabilities. She also pointed to the UK’s ruling Conservative Party, mentioning that Birmingham lost £1 billion in funding due to successive Conservative governments.
Thompson stated, “Local government is facing significant challenges, from a surge in adult social care demand and a drop in business rates income to the impact of high inflation.”
However, she emphasized that the city remains open for business and welcomes visitors.
A spokesperson for UK Prime Minister Rishi Sunak noted that local councils are responsible for managing their budgets, expressing concern about their governance and requesting assurances from the council leader regarding taxpayer money usage.
The council leader, John Cotton, mentioned plans to introduce a new jobs model to address the equal pay claims.
Birmingham, a diverse city in central England, hosted the Commonwealth Games in the previous year and is set to host the 2026 European Athletics Championships.