Why UK\’s Second-Biggest City Birmingham Has Declared Itself Bankrupt

The Birmingham City Council, responsible for governing the UK\’s second-largest city, has effectively declared bankruptcy due to its incapacity to cover £760 million ($955 million) in equal pay claims owed to female government employees who historically received lower compensation compared to their male counterparts.

As the largest local authority in Europe, the council has issued a section 114 notice, suspending all non-essential expenditures, citing an expected deficit of £87 million ($109 million) for the current fiscal year, as reported by Fortune. Notably, Birmingham also hosted the 2022 Commonwealth Games.

In an official statement, the Birmingham City Council has acknowledged its limited resources to fulfill its equal pay obligations, with no alternative means currently at its disposal to address this financial liability. The notice mandates an immediate cessation of all new spending, except for the protection of vulnerable individuals and the provision of statutory services.

More than a decade ago, in 2012, the Supreme Court ruled in favor of a predominantly female group of employees who had not received bonus payments despite performing roles traditionally associated with men within the Birmingham council.

In June, Birmingham\’s council disclosed that it had already disbursed £1.1 billion ($1.4 billion) in equal pay settlements over the past ten years. Nevertheless, there remained outstanding claims, estimated to accrue at a monthly rate ranging from £5 million ($6.3 million) to £14 million ($17.6 million).

Recognizing the magnitude of the challenge, the council expressed remorse for its inability to bring the situation under control and disclosed ongoing discussions with external auditors to explore potential solutions.

Typically, local councils rely on a combination of funding sources, including grants from the central government, revenue from parking services, and taxes.

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