Summary

  • The political leader of Birmingham City Council says crucial services will continue, after the council in effect declared bankruptcy

  • The council issued a notice on Tuesday to stop all but essential spending

  • The local authority - Europe's largest - has a budget gap of £87m in this year alone

  • The pressures have been linked to an outstanding £760m bill to settle equal pay claims

  • The council has already paid £1.1bn to settle claims after a Supreme Court ruling in 2012

  • The 2012 ruling found hundreds of mostly female employees in roles including catering and cleaning had not been paid fairly

  • Fixing a botched IT system could also cost up to £100m

Live Reporting

Allen Cook

  1. Leader admits situation 'huge challenge'

    We’ve just heard from John Cotton, the leader of Birmingham City Council, who spoke to BBC Radio WM.

    Here are some of the key things we learned:

    • Cotton admitted that the financial situation his council is facing is a "huge challenge", and said budgets were stretched by factors such as equal pay claims, rising inflation as well as a drop in government funding
    • He also said he was "focused on the job in hand", but when asked if people could lose their jobs said "there needs to be accountability"
    • Asked about the council’s growing equal pay claims bill, at up to £760m earlier this year and growing by £14m per month, he said they will work to bring in a new jobs model
    • He also said that the council would need to make “tough and robust decisions" regarding priorities, but sought to reassure residents that crucial services such as waste management would continue

  2. 'Working around the clock'

    Councillor Cotton admits he is not in Birmingham at the moment due to "long-standing family commitments" but says he is "working around the clock on this".

    He says he will continue to do so on his return to the city, and the issue is his "absolute top priority".

    Cotton ends his interview on BBC Radio WM by repeating that his key goal is "the delivery of that financial recovery plan".

  3. 'There needs to be accountability'

    Cotton says he is "focused on the job in hand".

    In terms of the authority being held accountable, he says two reviews and an inquiry led by a judge have been announced by the authority.

    "That's what I am focused on doing and that's what I am going to be working on tirelessly to deliver," he says.

    When asked about people possibly losing their jobs, Cotton says "there needs to be accountability and that needs to be done in an independent way".

  4. Is Birmingham in a position to host major events?

    Cotton is also asked by BBC Radio WM if the city is in a position to host major events, and acknowledges that "tough and robust decisions" need to be taken around the priorities of the council.

    He insists that the city of Birmingham is still in a "strong economic position".

  5. 'New jobs model to tackle equal pay claims bill'

    On the issue of the council's growing equal pay claims bill, at up to £760m earlier this year and growing by £14m each month, Cotton says they will move to bring in a new jobs model.

    "That is absolutely key to ensuring we close down the liability by April 2025," he says and promises to liaise with staff and unions on it.

    Bringing in the new scheme will mean "we can get back to focusing on delivering key services for the people of this great city of ours".

  6. Cotton asked if he has confidence in senior staff

    Cotton refuses to say if he has confidence in the senior officers at the council, saying that his focus is on dealing with the financial issues.

    He says his priority is on "ensuring we meet challenges together".

  7. Spending subject to 'stringent controls'

    Cotton adds that the council is working through a “detailed financial plan” and that specifics were still being worked through.

    He adds that the council will continue to provide crucial services such as social care, children safeguarding and waste management, but that budgets would be “subject to more stringent controls and oversight”.

  8. Council leader admits 'huge challenge' for authority

    John CottonBirmingham City Council

    The leader of Birmingham City Council John Cotton is now being interviewed by BBC Radio WM, after his authority issued its Section 114 notice.

    He describes the financial situation as a "huge challenge" for the authority.

    As well as the previously mentioned equal pay claims bill, he says rising inflation, growing demand for their services from residents and a drop in government funding all put pressure on their budget.

  9. Who is Birmingham's council leader?

    John CottonBirmingham City Council

    John Cotton was chosen by the Labour Party in May to be Birmingham City Council's leader after a report criticised the authority for having a "dysfunctional" climate.

    He was formerly the responsible for social justice, community safety and equalities before replacing the previous council leader, Ian Ward.

    Cotton said at the time he would seek to "heal wounds and bring people together".

    He also said: "These are not the circumstances I would have wanted to take over in, but I feel I have a duty to serve."

    Read more on this story here.

  10. 'There's not much money left in the reserves'

    Dr Philip Catney

    Dr Philip Catney, senior lecturer in politics at Keele University, says today’s announcement is the result of more than a decade of "progressive weakening of the budget base for local authorities".

    He says the funds that go from the national government to local authorities have "been significantly reduced, nearly by half" in the last 10 years, and that councils have had to find "creative solutions".

    He adds that as councils begin to think about their budgets for next year, they’re stating to recognise that "there’s not much money left in the reserves".

    "There's not much fat left to cut from the from the bone," he says.

  11. 'The impact will be immense' - your reaction

    People in Birmingham have been giving their reaction.

    Maria Smith described the news as "horrendous" and said the impact of it was "going to be immense".

    "My father was waiting for a lift to be installed under a grant. I don’t know if this is going to happen now. Oh god this is awful," she added on X, formerly known as Twitter.

    While user @Dooberryfirkin added "don't worry they can always use the motorist cash-cow".

    In texts to BBC Radio WM, Mick, in Harborne, said "the idea that you can have tax cuts and restrained council tax payment is a cosy delusion".

    While James, in Birmingham, added "surely saying bankruptcy will force government to bailout".

    The city council is the largest in Europe and Ben, in Wolverhampton, said today's news could sound the end of the authority as "having gotten too big to control".

    "Perhaps time to devolve to smaller, more local councils in our patch," he added.

  12. BBC get in touch banner.

    Are you in Birmingham? What's your reaction to the city council effectively declaring itself bankrupt? You can get in touch in the following ways:

    In some cases a selection of your comments and questions will be published, displaying your name and location as you provide it unless you state otherwise.

    Your contact details will never be published.

  13. Timeline of Birmingham's financial struggles

    Today's announcement is linked Birmingham Council's need to pay a £760m bill to settle equal pay claims.

    The financial issues have built since a ruling more than 10 years ago:

  14. Watch: Council declares itself effectively bankrupt

    Birmingham City Council announces Section 114 notice

    This is the moment that the deputy leader of Birmingham City Council - Councillor Sharon Thompson - announced the issuing of a Section 114 notice preventing all but essential spending.

  15. 'Failure of Titanic proportions'

    The declaration of effective bankruptcy has been called a "failure of Titanic proportions" by Birmingham opposition Liberal Democrat leader Roger Harmer.

    The major issues - of the equal pay claims bill and the council's IT problems - were the result of failures within the Labour-run authority, he adds.

    "Every one of Birmingham's citizens will feel the pain of this decision as we move into unchartered waters.

    "Services will be cut to essential only meaning that many services that people rely on, services that are essential to those people, are going to be cut."

    The council's leader, John Cotton, says the decision was a "necessary step as we seek to get our city back on a sound financial footing".

  16. Council staff already asked if they want to leave

    Allen Cook
    BBC News

    City council staff in Birmingham have already been asked if they want to leave as the authority struggled over its huge equal pay claims bill.

    The council started a voluntary severance scheme and information was sent to all its more than 10,000 employees, a spokesperson said.

    The scheme was launched on 21 August as part of the council's budget-saving plans for this financial year, they added.

    It typically sees an employee choosing to leave their role in return for a severance payment.

    The city council did not at the time reveal the details of the scheme or any savings target for it.

    There were some 10,000 staff employed by the council in 2021-22 a report for the authority said.

  17. News 'concerning' for Birmingham residents, says PM

    Downing Street has said today’s news is “concerning” for Birmingham residents, and that it was important for the council to "provide reassurances".

    Rishi Sunak’s spokesman says it is for locally-elected officials "to manage their own budgets", adding that the government has provided support to councils.

    He acknowledges that Birmingham has a "particular issue around equal pay settlements" and said ministers have "commissioned an independent governance review which will report in the coming weeks".

    As we've said, in July, Sunak ruled out a bailout for the council, saying it was "not the government’s job".

  18. 'Consequences for what the city looks and feels like'

    Professor Tony TraversLSE

    Professor Tony Travers, who specialises in local government issues, says the Section 114 notice doesn’t mean that basic services will be immediately stopped in Birmingham, although he warns that it could have an impact on services in the future - as well as the city’s reputation.

    He tells BBC Radio WM that the council can continue spending what it currently is, but "new and additional spending" will essentially be halted.

    That means that the budget for next year – 2024/25 – will be extremely difficult.

    "They’ll have to set a budget next year by law, but what will happen is that where they have discretion about setting budgets - libraries, adult education, even mending the streets - there will be pressure to cut all those services," he says.

    "And that has consequences about what the city looks like and feels like to live in, but also the reputation hit as well," he says.

  19. Growing calls for funding overhaul

    Alex Forsyth
    Political correspondent

    There have been calls for some time for the government to look again at the way that councils are funded.

    They get money in three main ways - from central government grants, through business rates and from council tax.

    But council leaders say they often don’t know how much money they’re going to get for each year far enough in advance and so they struggle to work out future spending plans.

    In the 2021 spending review, councils were set funding levels up until April 2025 – but many leaders say they want more certainty.

    The news about Birmingham City Council is only likely to add to the pressure on government to take another look at how council funding works.

  20. Councils across UK facing a black hole in budgets

    Birmingham skylineGetty Images

    Birmingham City Council is not alone in its financial struggles, as a BBC investigation revealed in August a black hole in local authority budgets was continuing to grow.

    The average council faced a £33m ($42m) predicted deficit by 2025-26 - a rise of 60% from £20m two years ago,they found.

    The BBC's Shared Data Unit surveyed 190 upper-tier authorities in the UK to find out the extent of the financial difficulties facing town halls, which provide services from adult social care to bin collections and pothole repairs.

    It revealed council chiefs expect to be £5.2bn short of balancing the books by April 2026 even after making £2.5bn of planned cuts.

    Only on Monday, nearby Stoke-on-Trent City Council said it was on the brink of effective bankruptcy with the government urged to help before it has to halt all spending.

    The union Unison said the situation meant some councils would not be able to offer the "legal minimum of care" next year.