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Britain's Second Largest Local Government Bankrupt!




On Tuesday, Birmingham City Council, the UK's second-largest city, took the unprecedented step of essentially declaring bankruptcy. In response to a substantial equal pay claims liability amounting to between £650 million (approximately $816 million) and £760 million (around $954 million), the council has initiated a Section 114 notice. This notice effectively puts a halt to all nonessential expenditures, focusing solely on maintaining essential services. Birmingham City Council, responsible for serving over one million residents, faces this financial challenge due to the outstanding equal pay claims it must address.


The city anticipates a deficit of £87 million ($109 million) in the upcoming 2023-24 financial year.


Sharon Thompson, the council's deputy leader, addressed councilors on Tuesday, highlighting the city's challenges, which include the longstanding issue of historic equal pay liabilities, as reported by the United Kingdom's PA Media news agency.


Thompson also attributed some of the financial difficulties to the actions of the UK's ruling Conservative Party, pointing out that Birmingham had suffered a loss of £1 billion in funding due to decisions made by successive Conservative governments.


"The local government is grappling with a complex set of challenges," she remarked. "Similar to councils nationwide, our council is confronting unparalleled financial hurdles, including a sharp rise in demand for adult social care, substantial reductions in business rates revenue, and the impact of soaring inflation."


"Despite these significant challenges, our city remains open for business, and we extend a warm welcome to all," she added.


A spokesperson representing UK Prime Minister Rishi Sunak told reporters on Tuesday, "Clearly, the management of their budgets falls within the purview of locally elected councils." The spokesperson noted that the government has maintained regular engagement with these councils, expressing concerns about their governance arrangements and seeking assurances from the council's leader regarding the responsible use of taxpayers' funds.


Elsewhere, the council's leader, John Cotton, stated to the BBC that a new employment model would be introduced to address the substantial equal pay claims liability.


This multicultural city stands as the largest in central England, having hosted the Commonwealth Games last year, a prominent sporting event for Commonwealth nations, and being slated to host the 2026 European Athletics Championships.


Reference:

Nicholls, R.P. (2023) Britain’s second-largest city effectively declares itself bankrupt amid $950 million equal pay claims | CNN Business, CNN. Available at: https://edition.cnn.com/2023/09/05/economy/birmingham-council-bankrupt-uk-gbr-intl/index.html (Accessed: 6 September 2023).



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