Birmingham City Council has declared itself effectively bankrupt. The local authority – Europe’s largest – has issued a notice preventing all but essential spending.
The pressures have been linked to a £760m bill to settle equal pay claims, with £1.1bn already paid to settle claims after a Supreme Court ruling in 2012.
But as of March, the liability was still estimated to be between £650m and £760m. The 2012 ruling found hundreds of mostly female employees in roles including catering and cleaning had not been paid fairly.
It’s also emerged that fixing the council’s botched IT system could also cost up to £100m.
GMB Union, Birmingham City Council’s largest staff union, has responded to the announcement that the authority has issued a Section 114 notice.
A Section 114 notice is issued when Council officials believe they do not have the resources available to meet their required expenditure for the year.
It came as Council representatives were expected to appear at the Employment Tribunal to attempt to defend their job evaluation scheme against thousands of equal pay claims submitted by GMB members employed by the council.
Birmingham City Council Chief Executive Deborah Cadman told Councillors in June that the Council owed between £650 million and £760 million to its workers to settle its equal pay liability, adding that the figure was growing by between £5 million and £14 million every month.
The council’s latest estimate places the liability at over £1 billion.
Michelle McCrossen, GMB Organiser, said: “Today’s announcement is a humiliating admission of failure on the part of Birmingham City Council’s officials and leadership.
“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.
“Due to the reckless incompetence of council bosses, 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.
“GMB will continue to fight for pay justice for our members, and to ensure those responsible for this crisis are held to account.”
