Birmingham City Council admits it can’t afford to pay £760m equal pay liability - full statement

Birmingham City Council has made an alarming admission that it can’t afford to pay its equal pay liability - which is currently in the region of £650m and £760m and continuing to accrue at an estimated rate of between £5 million and £14 million a month.

The entire revenue budget for Birmingham City Council for a year stands in the region of £750m which it uses to fund services across the city, including refuse collection, social services and road maintenance.

The council has recently faced issues with the cost of a flagship IT system that has been plagued by delays could now cost up to £100m - five times its original budget.

The local authority has issued a statement outlining the huge financial issues it faces this afternoon (Wednesday, June 28) and said that it is in discussions with the central government Department for Levelling Up Housing and Communities.

The council has put in place “enhanced governance” to deal with the crisis. It is due to announce proposed spending controls “in the very near future”.

Here’s Birmingham City Council’s statement regarding the Equal Pay update in full:

“A detailed and fresh analysis of the council’s ongoing equal pay claims has been conducted in light of issues raised as a result of the implementation of the Oracle financial system. The council has already paid out a total of £1.1bn in relation to the settlement of Equal Pay claims over the last decade. However, the refreshed analysis has revealed that significant additional Equal Pay costs will need to be provided for by the council.

“It is estimated that as of 31 March 2023 the council’s current equal pay liability is in the region of £650m and £760m with this liability continuing to accrue at an estimated rate of between £5 million and £14 million a month. Given the huge sums involved the council cannot afford to pay this from existing resources, including reserves. To put the scale of this financial challenge in context, the council’s entire revenue budget for a year stands in the region of £750m, which is used to fund services across the city.

“This is one of the biggest challenges this council has ever faced, and we apologise for the failure to get this situation under control. It means there will be significantly fewer resources available in the future compared to previous years and we will need to reprioritise where we spend taxpayers’ money.

“We have already taken action, including engaging with our external auditors and we have held discussions with officials at the Department of Levelling-Up, Housing and Communities. These discussions remain ongoing as the council looks to explore a number of possible solutions.

“Enhanced governance will be put in place to monitor the situation, including a panel of elected members, Chaired by the Leader of the Council, with the support of an independent expert in local government finance. The Chief Executive and Interim Director of Finance have begun work to develop a Budget Recovery Plan.

“A values framework will be introduced to inform the difficult choices and the council’s focus will remain on tackling social injustice and inequality. Further updates, including proposed spending controls, will be shared in the very near future.”