Birmingham: The second largest city in Britain has effectively declared bankruptcy

London
CNN
—

Britain’s second-largest city effectively declared bankruptcy on Tuesday, shutting down all non-essential spending after being issued equal pay claims totaling £760 million ($956 million).

Birmingham City Council, which provides services for more than a million people, served a Section 114 notice on Tuesday, halting all spending except essential services.

The notice report said the shortfall arose due to difficulties paying between £650 million (about $816 million) and £760 million (about $954 million) in equal pay claims.

The city now expects to run a deficit of £87 million ($109 million) for the 2023-24 financial year.

Sharon Thompson, the council’s vice president, told council members on Tuesday that it faces “long-standing issues, including historical liability concerns related to equal pay,” according to Britain’s PA Media news agency.

Thompson also partly placed the blame on the UK’s ruling Conservative Party, saying Birmingham “got £1bn of funding taken by successive Conservative governments”.

“Local government is facing a perfect storm,” she said. “Like councils across the country, it is clear that this council faces unprecedented financial challenges, from huge increases in demand for adult social care and significant cuts in business rates income, to… The impact of rampant inflation.”

She added: “Although the council faces significant challenges, the city remains very much open for business and we welcome people as they come.”

“It is clear that locally elected councils are managing their own budgets,” a spokesman for British Prime Minister Rishi Sunak told reporters on Tuesday. The spokesman added that the government “engages with them regularly to this end, has expressed concerns about their management arrangements and has sought assurances from the Speaker of the Council on the optimal use of taxpayers’ money.”

Council leader John Cotton elsewhere told the BBC that a new jobs model would be brought to the council to address the Equal Pay Claims Bill.

The multicultural city is the largest in central England. It hosted the Commonwealth Games last year, a major sporting event for Commonwealth countries, and is scheduled to host the 2026 European Athletics Championships.