Birmingham ‘Bankrupt’: How An Equal Pay Claim Took Down the UK’s Second Largest City

Note from the author: The information included within this article is updated as of the publication date, September 11th, 2023. As the situation evolves, that information may have changed. This article does not represent in any way the opinion of this newspaper and merely contains facts.

Birmingham. With a population of 1,144,900 (as of the 2021 census), it is located roughly 160 kilometres northwest of London and regarded as the second-largest UK city behind the capital. However, things haven’t been economically stable for Birmingham. Just recently, its city council declared itself ‘bankrupt.’ In this week’s article, we’re looking into what made the city do this extreme measure, the response, and the effects it may have on the residents of Birmingham.

On September 5th, the Birmingham City Council issued a Section 144 Notice, signalling a cut on all but essential funding. It marked a somewhat desperate attempt for the city to combat a worsening economic situation caused by one hefty legal bill, the instalment of a new IT system, and decreased government funding.

In 2012, the Supreme Court ruled in favour of a group of individuals who claimed they had been underpaid in the past. The 174 former council employees who brought the case, all except 4 of whom were women, claimed the council to have unequally paid them for similar jobs that men held. Later, more people protested these claims. That prompted a substantial bill for the city council and is the primary reason that took down the city’s economy. The city had already paid out £1.1 billion over the last decade settling these claims and still has an estimated £760 million to get paid. That is a substantial amount even for a city of this scale, and with a projected budget deficit of £87 million for the 2023-24 fiscal year, it’s no surprise all that has taken a toll on Birmingham.

The crumbling of Birmingham’s city council has sparked a fiery debate in Parliament in nearby London with raised concerns of more cities going broke. You see, city councils rely on two sources to keep financially afloat: Funding from the government and taxing taxpayers. The problem in recent years is decreased government aid, a 50% drop between the 2010-11 and 2020-21 fiscal years. That has made sustaining services difficult for city councils, and combined with the legal payments and money needed to install a new IT system, the third reason for Birmingham’s bankruptcy. Despite the continuing crisis in Birmingham, the government has refused to aid the city.

So what happens next? Well, residents of Birmingham will have a hike in “council tax,” and the city has announced it will tighten spending controls already in place before its ‘bankruptcy.’ However, it is notable that besides the fact new funding will get stopped, previous money output will continue, as well as funding for the protection of vulnerable groups. These economic measures are likely in the long term.

In conclusion, Birmingham’s troubles aren’t ending anytime soon. What do you think? Would you have done anything differently to avert such a crisis if you had the authority? That’s the end of this production from the New News Newsminute. Thank you for reading, and tune in next time for more updates and analysis.