Birmingham City Council, the largest local authority in Europe, has issued a Section 114 notice, which means it has judged itself to be in financial distress and can no longer balance its budget.
The issuing of a Section 114 Notice restricts all new spending with the exception of protecting vulnerable people and statutory services and pre-existing commitments.
In a joint statement on Tuesday, September 5, 2023, the Leader and Deputy Leader of the Birmingham City Council, John Cotton and Sharon Thompson, noted that the notice was a “necessary step as we seek to get our city back on a sound financial footing.”
“Despite the challenges that we face, we will prioritise core services that our residents rely on, in line with our values of supporting the most vulnerable,” Cotton and Thompson added in their statement.
They attributed the council’s financial crisis to “longstanding issues” including equal pay liability claims and complications from implementing a new Oracle IT system.
The flagship system, meant to streamline council payments and HR systems, was set to cost £19m but after three years of delays, it was revealed in May that it could cost up to £100m.
“Like local authorities across the country, it is clear that Birmingham City Council faces unprecedented financial challenges, from huge increases in adult social care demand and dramatic reductions in business rates income, to the impact of rampant inflation.”
John Cotton & Sharon Thompson
“It is clear that local government is facing a perfect storm,” the statement said.
The statement continued: “We implemented rigorous spending controls in July, and we have made a request to the Local Government Association for additional strategic support.
Birmingham City Council has paid out almost £1.1bn in equal pay claims since a landmark case was brought against the authority in 2012. The council had a current liability of £650-750m, accruing at a rate of £5-14m a month.
Thousands of women employed by the council were granted compensation following a successful equal pay claim in which they argued they had missed out on bonuses awarded to men on the same paygrade, with claims stretching back several years.
The council admitted that it was in a position where it must fund the liability accrued to date but did not have the resources to do so.
Due to this, the council’s interim director of finance, Fiona Greenway, issued the Section 114 notice, which confirmed there were insufficient resources to meet the equal pay expenditure and there were no other means of meeting the liability.
Cotton and Thompson’s statement disclosed, “The council’s senior officers and members are committed to dealing with the financial situation and when more information is available, it will be shared.”
“A Humiliating Admission Of Failure”
GMB, the biggest union among Birmingham City Council staff, said the announcement was a “humiliating admission of failure” on the part of the council’s leadership.
The union’s organiser, Michelle McCrossen, opined, “Not only are they responsible for creating this crisis through years of discriminating against their own staff, but even they no longer believe themselves capable of fixing it.”
“For decades the council has stolen wages from its low-paid women workers, running up a huge equal pay liability that has brought Birmingham to the brink.
“Thousands of city employees will be worrying for the future of their jobs and of the essential services that they provide for the people of Birmingham.”
Michelle McCrossen
McCrossen added that the union would “fight” for pay justice for its members and to hold those responsible for the “crisis” to account.
Opposition leader, Robert Alden, also stated that the Birmingham City council had “failed to show the proper speed and urgency needed to tackle equal pay.”
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