City of Birmingham, UK’s second largest city, declares bankruptcy

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According to comprehensive foreign media reports, on September 5, local time, the municipal council of Birmingham, the second largest city in the United Kingdom, issued a “section 114 notice”, announcing that it was “effectively bankrupt”.

Image source: Screenshot of the British Broadcasting Corporation (BBC) report

According to the British “Guardian” report, in a statement issued on the same day, relevant leaders of Birmingham City Council stated that “issuing the Section 114 notice (Section 114 notice) is a necessary step” and is “seeking to restore our city. necessary steps for a healthy fiscal base”.

What is a “Section 114 Notice”? According to the BBC, under the Local Government Finance Act 1988, the council’s chief financial officer is obliged to issue the notice if they believe the authority will not be able to meet spending commitments through revenue, and MPs are not required to do so.

The issuance of such a notice is often described as “virtually bankrupt”. That means they cannot make new spending pledges and must meet within 21 days to discuss next steps.

In addition, no new spending will be permitted except to fund statutory services (including protecting vulnerable groups), but existing commitments and contracts will continue to be honored. Most councils in this position will pass revised budgets to reduce spending on services.

So why did Birmingham City Council issue this statement, declaring it “bankrupt”?

Leaders of Birmingham City Council said the area was facing a financial crisis due to a series of “long-standing problems”.

“Like local authorities across the country, Birmingham’s councils are clearly facing unprecedented financial challenges, from a significant increase in adult social care needs, a significant reduction in corporate tax rate revenues, to the impact of runaway inflation,” they said.

However, a number of British media pointed out that Birmingham’s “bankruptcy” is likely to be related to the hundreds of millions of pounds bill to settle equal pay claims.

In 2012, Birmingham City Council lost an appeal over equal pay. At the time, a British court ruled in favor of 174 employees, mostly women, including government-funded domestic helpers, school cooks and more. They believe that they are paid less at work than male workers for work of equal value, such as porters and garbage men.

According to data previously disclosed by Birmingham City Council, they will have to pay at least 757 million pounds to settle claims related to equal pay.

Regarding Birmingham’s latest statement, Downing Street said that the local council announced that it was in financial difficulties, which would make people “concerned”.

A spokesman for the British prime minister also said that “the government has stepped in to provide support.” The spokesman also said that the government expressed concerns about the local “governance arrangements” and asked leaders to “ensure that taxpayers’ money is used to the best use”.

He acknowledged that Birmingham had “particular problems addressing equal pay claims” and said officials “have commissioned an independent governance review, which will report in the coming weeks”, the report said.

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