Birmingham City Council faces financial crisis over huge bill
It could wipe funding for services across the city
Frontline services in Birmingham are facing huge cuts as the city council has been ordered to pay a huge Equal Pay bill.
The authority has been told it must pay ÂŁ650 million immediately. The Government has now stepped in to work out what happens next. An urgent spending freeze has also been announced.
A statement from Birmingham City Council said: " A detailed and fresh analysis of the council’s ongoing equal pay claims has been conducted in light of issues raised as a result of the implementation of the Oracle financial system.
"The council has already paid out a total of ÂŁ1.1bn in relation to the settlement of Equal Pay claims over the last decade. However, the refreshed analysis has revealed that significant additional Equal Pay costs will need to be provided for by the council.
!It is estimated that as of 31 March 2023 the council’s current equal pay liability is in the region of £650m and £760m with this liability continuing to accrue at an estimated rate of between £5 million and £14 million a month.
"Given the huge sums involved the council cannot afford to pay this from existing resources, including reserves. To put the scale of this financial challenge in context, the council’s entire revenue budget for a year stands in the region of £750m, which is used to fund services across the city.
"This is one of the biggest challenges this council has ever faced, and they have apologised for the failure to get this situation under control. It means there will be significantly fewer resources available in the future compared to previous years and they will need to reprioritise where they spend taxpayers’ money."
The council added they have already taken action, including engaging with external auditors and have held discussions with officials at the Department of Levelling-Up, Housing and Communities.
Enhanced governance will be put in place to monitor the situation, including a panel of elected members, Chaired by the Leader of the Council, with the support of an independent expert in local government finance. The Chief Executive and Interim Director of Finance have begun work to develop a Budget Recovery Plan.