BIRMINGHAM COUNCIL declared effective bankruptcy today but was lambasted for blaming it on equal pay claims of nearly £2 billion.

Officials for Europe’s largest local authority issued a section 114 notice, saying it “does not have the resources” to fund its equal pay liability, with a gap in its current budget of £87 million.

In June, the council revealed it had paid out £1.1bn in equal pay claims over the past decade, and had a current liability of £650-750m, accruing at a rate of £5m to £14m a month.

The Labour-run council said it must now stop new spending that is not for protecting vulnerable people and statutory services.

In a joint statement, its leader and deputy leader, John Cotton and Sharon Thompson, said: “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, it is clear that local government is facing a perfect storm.”

GMB has been representing more than 2,500 women in a long-running equal pay battle with the council.

Regional organiser Michelle McCrossen 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.” 

The council leadership earlier this year confirmed that problems with a new IT system being rolled out would cost up to £100m to fix, and it also criticised the fact that it had “had £1bn of funding taken away by successive Conservative governments.”

Its section 114 announcement also came a day before its representatives were expected to appear at the employment tribunal to defend its job evaluation scheme against thousands of equal pay claims submitted by GMB members employed by the council, said the union.

Council opposition leader Robert Alden accused it of “lying” after it published a financial plan described as a “bold budget designed to “maximise the potential of a golden decade for the city” last year.

The Prime Minister’s official spokesman said: “The government for its part has stepped in to provide support, an additional £5.1bn to councils in 23/24, which is more than a 9 per cent increase for Birmingham City Council.

“Clearly it’s for locally elected councils to manage their own budgets. I know the department has been engaging regularly with them to that end and has expressed concern about their governance arrangements and has requested assurances from the leader of the council about the best use of taxpayers’ money.”

He acknowledged Birmingham has a “particular issue around equal pay settlements” and said ministers have “commissioned an independent governance review which will report in the coming weeks.”

“It will be concerning for the people of Birmingham and it is important that the council provide reassurance and deliver on what has been requested by the department,” he added.

Minister for Local Government Lee Rowley said: “We have been aware of significant problems at Birmingham City Council for some time, caused by a failure to deal with historic pay issues and a bungled IT implementation.

“It is hugely disappointing, but not unexpected, that Birmingham has issued a section 114 notice today.

“In April, recognising that potential problems were developing, we requested, and Birmingham agreed, to undertake an external review. We await the outcome of that report and we will consider it carefully.”

Mayor of the West Midlands Andy Street said: “Today’s news from Birmingham City Council is deeply disturbing and raises serious questions about the council’s leadership and the decisions they have taken over the past decade.”