Birmingham City Council this week became the latest authority to declare itself effectively bankrupt – following on from five others in just five years.
The Labour-run council, Europe’s largest local authority, was hit with a staggering £760million bill to settle an equal pay claim, which it yesterday said it could not afford.
In a statement, the town hall confirmed it had issued the declaration that it cannot balance its books.
The scandal echoed similar budget fiascos which have seen authorities in Northampton, Croydon, Thurrock, Woking and Slough declare bankruptcy since 2018. Before that the last one to run out of money was Hackney in 2000.
Birmingham’s financial demise comes after dire warnings that dozens of other English authorities could soon follow suit, with worrying figures suggesting at least 30 per cent of councils in some of the poorest areas of the country are considering declaring effective bankruptcy this year or next.
Last week it was revealed a survey of 47 council in the north, the midlands and on the south coast were facing overwhelming strain on finances – with five in the process of deciding whether to issue a section 114 notice of their inability to balance their annual budget in 2023-24.
Meanwhile, a further nine local authorities which are members of the Special Interest Group of Municipal Authorities (Sigoma) said they may have to declare bankruptcy next year.
Sigoma claimed it was the first time so many member councils were considering issuing a section 114 notice, which freezes all non-essential spending.
It followed repeated warnings over the dire state of local authority budgets, with the Institute for Fiscal Studies recently reporting councils serving poorer communities received less investment – largely as a result of delays to planned reform of formulae that determine government cash allocations.
The first Section 114 notice was issued by London’s Hackney Council in 2000, followed by Northamptonshire County Council in 2018.
Northamptonshire County Council, just months after issuing the section 114 notice, agreed to enormous cuts to jobs and vital services in a bid to reduce a £70million shortfall.
Councillors at the time were slammed for building a lavish new £53million headquarters shortly before their council effectively went bankrupt.
During the past five years, councils have begun declaring bankruptcy at an unprecedented rate, with Conservative-run Thurrock council issuing one in 2022, followed by Lib Dem-led Woking earlier this year.