Battling off bankruptcy: Birmingham City Council issues legal plea for financial help

The local authority have admitted defeat in their efforts to recover their finances and as a result have issued a section 114 notice.

In July 2023 Birmingham City Council announced they would be halting all non-essential spending after admitting that settling outstanding claims could cost £760m. Members of the local authority have stated problems such as installing a new IT system, £1bn in government cuts over the past decade and a spiralling social care crisis have all contributed to it’s financial downfall.

Alongside this, the local authority also launched a voluntary severance scheme which was sent to the councils 10,000 employees and asked if any of them wanted to leave their position.

However, these measures have been deemed unsuccessful as today the council have announced they have had to issue a Section 114 notice – the equivalent of a white flag surrender that officers cannot see a way out of their financial mess without support and intervention.

The council have said ‘it does not have the resources’ to fund its equal pay liability, and has a gap in its current budget of £87m.

Following this, in a council meeting which took place this morning, Robert Alden, the leader of the Conservative opposition, accused the council of ‘lying to the people of Birmingham.’

Mr Alden said: ‘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.’

In a statement, the leader and deputy leader of the 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 2023-24, which is more than a 9% increase for Birmingham City Council.’

He added that it is for ‘locally elected councils to manage their own budgets’ and that the government had expressed concern about ‘their governance arrangements and has requested assurances from the leader of the council about the best use of taxpayers’ money’.

He acknowledged Birmingham had a ‘particular issue around equal pay settlements’ and said ministers had ‘commissioned an independent governance review which will report in the coming weeks.’  

Against this backdrop, Birmingham is not the only local authority effectively facing bankruptcy. Last week research by the Special Interest Group of Municipal Authorities (sigoma) found 26 councils in some of Britain’s most deprived areas were at risk of losing all their money within the next two years.

Image: Brian Lewicki