Birmingham City Council has issued a Section 114 notice, effectively declaring itself bankrupt. This means that the council has insufficient resources to meet its financial liabilities, including a potential £760 million bill for equal pay claims.
The council has said that it will tighten spending controls and put all new spending on hold, with the exception of protecting vulnerable people and statutory services. This is a significant development for the city, as the council is a major employer and provider of services.
In a joint statement, council leader John Cotton and his deputy, 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.
"We implemented rigorous spending controls in July, and we have made a request to the Local Government Association for additional strategic support.
"Today's issuing of a section 114 Notice is a necessary step as we seek to get our city back on a sound financial footing so that we can build a stronger city for our residents.
"Despite the challenges that we face, we will prioritise core services that our residents rely on, in line with our values of supporting the most vulnerable."
The Mayor of the West Midlands, Andy Street, expressed his concern in the statement below, but insisted the city was not failing
Deeply disturbing news from Birmingham City Council today.— Andy Street (@andy4wm) September 5, 2023
You can read my full thoughts here👇🏻 pic.twitter.com/zuXo62Hl0L
The chairman of the Local Government Association, Shaun Davis, said last night that a number of councils are close to facing the same financial fate as Birmingham either this financial year or in the next financial year.