Birmingham City Council effectively declares bankruptcy

The move from Europe’s largest local authority has been attributed to “longstanding issues” including equal pay liability claims and complications from implementing a new IT system. A statement published by the council’s leader and deputy leader, John Cotton and Sharon Thompson, said the notice was “a necessary step as we seek to get our city back on a sound financial footing”.  

The council previously implemented what it describes as “rigorous spending controls” in July and has also made a request to the Local Government Association for additional strategic suppor.  

Birmingham follows the likes of Slough, Croydon, Thurrock and Woking to declare bankruptcy over the past two years. It also comes after research from the Special Interest Group of Municipal Authorities (Sigoma) suggested five were currently in the process of deciding whether to issue a section 114 notice, while 12 more were considering such a notice in 2023/24.

This has been driven by a growing number seeing their cash reserves, usually held over to plug gaps in budgets, dwindle.

Reflecting on these figures, Sigoma chairman and leader of Barnsley Council Sir Stephen Houghton, said: “The government needs to recognise the significant inflationary pressures that local authorities have had to deal with in the last 12 months. 

“At the same time as inflationary pressure, councils are facing increasing demand for services, particularly in the care sector. 

“Pay increases are putting substantial pressure on budgets, and so the government must ensure that local authorities have the additional funding they need to fully fund these pay increases or risk impacting future service delivery.

 
“The funding system is completely broken. Councils have worked miracles for the past 13 years, but there is nothing left.”