Birmingham, the second-largest city in Britain, declared bankruptcy due to a yearly budget deficit of millions of pounds.
According to a statement, the municipal council issued a Section 114 notice on Tuesday to settle its debts. When a council receives a Section 114 notice, it indicates that it is unable to pay its debts and cannot make any new spending commitments. Following the notice's publication, the local government refocuses on keeping just necessary services running while ceasing "unessential" ones.
According to The Guardian, the council leaders have cited £1 billion in government budget cuts, difficulties installing a new IT system, and a £760 million cost for equal pay claims as the causes of their financial difficulties.
According to the BBC, approximately 5,000 former municipal employees won a challenge for equal pay in 2010. The majority of these individuals were women. According to the British Broadcaster, the group did not earn bonuses awarded to jobs that are often filled by men, such street cleaners.
The council has since paid out almost $1 billion in equal pay claims settlements, and its £760 million tab is rising by as much as $14 million per month.
The city must offer statutory services, such as education, adult social care, housing services, and child social care, despite being bankrupt. Other "unessential" service cuts will be made, though it is unclear what precisely would be affected.
The city administration, run by the opposition Labour Party, has cited the budgetary effects of inflation as well as declining business rates revenue. The need for adult social care has also skyrocketed, according to the council's leader and deputy leader, John Cotton and Sharon Thompson.
In the UK, adult social care encompasses both more general assistance to keep individuals active and involved in their communities as well as personal care such as assistance with getting dressed, bathing, and getting out of bed in the morning. Every adult over the age of 18 is entitled to a free review to see if they could be eligible for assistance or support.
According to the UK government, the locals should be concerned about the council's financial situation, according to The Guardian.
"The government for its part has stepped in to provide support, an additional £5.1 billion to councils in 2023-'24, which is more than a 9% increase for Birmingham city council," said the official spokesperson for the prime minister. It seems obvious that locally elected municipalities should oversee their own budgets.
The spokeswoman acknowledged that equal pay settlements were a "specific issue" in Birmingham, adding that the government has asked the council leader for assurances regarding the most efficient use of tax dollars.
Not the first city to declare bankruptcy is Birmingham. Essex's Thurrock Council filed for bankruptcy in December.
According to a report released last week by the Special Interest Group of Municipal Authorities, a grouping of 47 urban councils, at least 26 municipalities nationwide face a two-year effective insolvency risk.