Birmingham City Council: Equal pay decision delay prompts more warnings

The warnings are issued after a delay to to a "hugely significant" decision on equal pay

New emergency finance warnings have been issued by Birmingham City Council officials over a delay to deal with its equal pay liabilities.

The government announced on Tuesday it will intervene in the running of the local authority owing to its financial crisis.

Commissioners will start work on 26 September, the council's leader said.

As a result, a meeting to take a "hugely significant" decision on equal pay is delayed, added John Cotton.

The authority is facing the prospect of a £760m bill to settle equal pay claims which is increasing by £5m to £14m each month.

Birmingham City Council has filed a section 144 notice - with spiralling costs of its IT system partly to blame

The delay has prompted council officers to issue an additional section 114 notice warning that the delay would lead to further mounting liabilities.

The council's chief legal officer has also issued a separate section 5 notice, flagging that the authority's position could be legally problematic.

The meeting of the council's business management committee, set to discuss how to resolve the issue of equal pay, has been put back to 28 September, said Mr Cotton.

"In my view this is simple common sense, as it would no longer be appropriate for the committee to make such a consequential decision without the commissioners having had the opportunity to examine the options and inform the committee of their view," he said, adding that he was "disappointed" by the issuing of the new financial warnings.

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The council has already paid out more than £1bn in compensation to underpaid workers.

The settling of claims in 2012 followed a court ruling that found hundreds of mostly female employees, working in roles such as teaching assistants, cleaners and catering positions, missed out on bonuses given to staff in traditionally male-dominated roles, such as refuse collectors and street cleaners.

The introduction of a new IT system, which has come under fire, has also seen expected costs spiral from £19m to £100m.

Council chief executive Deborah Cadman said a "redesign" of services was necessary

Writing to staff, the council's chief executive Deborah Cadman explained the notices had been issued because the authority had been "unable to agree a new methodology for job evaluation with the trade unions," which was needed to end pay inequity.

"I want to reassure you that this has no additional impact on the council over and beyond the section 114 notice that was issued on 5 September," she added.

An extraordinary general meeting of the full council is due to be held on Monday to discuss a financial recovery plan.

An emergency meeting would also be held within 21 days to discuss the latest developments, she told staff.

Analysis - Elizabeth Glinka, BBC Midlands Political Editor

This news was broken not via the council's press office but in a statement on the local Labour Group's X/Twitter account.

The statement from Mr Cotton shows his determination to stay ahead of the story on this occasion and also demonstrates the extent to which relations between councillors and senior officers have become strained.

In a previous statement, he raised concerns about "senior capacity" and again he makes it clear he believes the intervention of government-appointed commissioners is needed, something Ms Cadman had said to staff she had hoped to avoid.

There is no getting away from the fact the issuing of these notices is embarrassing. Already effectively bankrupt, Birmingham is now confirming that it currently has no plan to stem its liability on equal pay, and the £760m bill we've so often heard quoted is set to rise.

The council currently doesn't have a way forward and officers are now saying the situation as it stands is so problematic and legally dangerous they had to make the government aware.

The council is facing a £760m equal pay bill

West Midlands Mayor Andy Street said the latest development did not make "any substantial difference" to the city but it was "not a good look".

"I'm literally talking to investors from around the world," he explained.

"I had an Australian CEO in my office the other day saying 'how can we be investing here?'"

"My answer is the city council is one issue, the rest of the city and the region is another very different issue."

What is a Section 114 notice?

• Under the Local Government Finance Act 1988, if a council's chief financial officer believes the authority cannot meet its expenditure commitments from its income, they have to issue such a notice

• They do not need the consent of councillors to do so

• Local authorities in the UK cannot go bankrupt but the issuing of the notice is often described as "being effectively bankrupt", meaning they cannot make new spending commitments and must meet within 21 days to discuss next steps

• No new expenditure is permitted with the exception of funding statutory services, including safeguarding vulnerable people, but existing commitments and contracts will continue to be honoured

• Most councils in such a position pass an amended budget, reducing spending on services

• Thurrock, Croydon, Slough and Northamptonshire have issued section 114 notices in recent years

(Source: House of Commons Library)

There have been calls for the council to urgently sell off assets, including land and its stake in Birmingham Airport, in order to raise cash.

Council tax rises, job losses, service cuts and asset sales are also likely to be required as part of the council's recovery plan.

BBC Midlands Political Editor Elizabeth Glinka said there might also be outsourcing of major divisions and services within the council, such as bin collections.