UK’s second-biggest city after London effectively declared itself bankrupt on Tuesday, shutting down all nonessential spending after being issued with equal pay claims totaling up to £760 million ($954 million).
Birmingham City Council, which provides services for more than one million people, filed a Section 114 notice on Tuesday, halting all spending except on essential services.
The deficit arose due to difficulties paying between £650 million (around $816 million) and £760 million (around $954 million) in equal pay claims, the notice report says.
Councils across England and Wales are under severe financial stress as a result of rising social care costs, soaring inflation and reduced income.
The total funding gap for local authorities in England and Wales is expected to grow to £2bn or more this financial year, according to the Local Government Association.
In July, the representative body warned that councils were struggling to meet growing demand for the basic services they are legally required to deliver while also fulfilling a legal obligation to balance the books.
A spokesperson for UK Prime Minister Rishi Sunak told reporters on Tuesday: “Clearly it’s for locally elected councils to manage their own budgets.” The spokesperson added that the government has been “engaging regularly with them to that end and has expressed concern about their governance arrangements and has requested assurances from the leader of the council about the best use of taxpayers’ money.”