UK’s second-largest city ‘declares bankruptcy’

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Birmingham, the UK’s second-largest metropolitan region outside of London, has virtually declared itself bankrupt after its city council cut all non-essential spending in response to a potential $956 million equal pay settlement payment.

Birmingham City Council declared itself in financial difficulty on Tuesday, saying it will “tighten the spend controls already in place” and appoint an external administrator to manage short-term fiscal planning.

“In June, the council announced it had a potential liability relating to equal pay claims in the region of £650m to £760m ($816m to $956m), with an ongoing liability that is accruing at a rate of £5m to £14m ($6.3m to $17.5m) per month,” according to the statement.

It added that the council “does not have the resources” to pay the outstanding sum but is “committed to dealing with the financial situation.” The body also said that all new spending is to be ceased, except support to vulnerable people and various statutory services.

The settlement amount is the result of a 2012 Supreme Court judgement in favor of predominately female Birmingham City Council employees who claimed that bonus program payments were mostly given to men in roles primarily filled by women.

Deputy Council Leader Sharon Thompson stated on Tuesday that the Labour-run organization is dealing with “longstanding issues, including the council’s historic equal pay liability concerns.” She went on to say that the council “had £1 billion ($1.25 billion) of funding slashed by successive Conservative governments.”

According to a representative for UK Prime Minister Rishi Sunak, “clearly it’s for locally elected councils to manage their own budgets.” Sunak’s office also stated that Downing Street has “expressed concern about their governance arrangements and has requested assurances from the council leader about the best way forward.”