Birmingham city council, the largest local authority in the country, has in effect declared itself bankrupt, ‘The Guardian’ informs.
The notice, preventing all but essential spending to protect core services, was issued with council leaders blaming a £760m bill for equal pay claims, problems installing a new IT system and £1bn in government cuts over the past decade.
The council said “it does not have the resources” to fund its equal pay liability, and has a gap in its current budget of £87m.
In a statement, the leader and deputy leader of the Labour-run council, 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.”
The prime minister’s official spokesperson 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% increase for Birmingham city council.”
The council last year published a financial plan described as a “bold budget” designed to “maximise the potential of a golden decade for the city”, ahead of the arrival of the Commonwealth Games that took place in Birmingham last summer.
In a council meeting Robert Alden, the leader of the Conservative opposition, accused the council of “lying to the people of Birmingham”.
“This administration claimed that under Labour Birmingham was facing a golden decade. This was fools’ gold. It is cloud cuckoo land to claim the problems in Birmingham are being replicated across the country,” he said.
Last week, it was revealed that at least 26 councils in some of Britain’s most deprived areas were at risk of effective bankruptcy within the next two years, according to the Special Interest Group of Municipal Authorities (Sigoma), a collective of 47 urban councils.
Sources in the council said the financial crisis was a “ticking timebomb that was waiting to go off”, and expressed fears that “some of the poorest people in our country” would suffer.
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