In a shocking announcement on Tuesday, the UK's second largest city conceded its inability to maintain financial stability, pointing the finger at years of inadequate funding from Conservative administrations.
Birmingham City Council, situated in central England, disclosed that it had invoked a Section 114 Notice under the Local Government Finance Act of 1988, effectively halting expenditure on all non-essential services.
Leaders of the council, under the control of the Labour Party, deemed this move as an essential measure to restore fiscal strength. They asserted that "long-standing challenges," exacerbated by the implementation of a new computer system, had been further compounded by successive Conservative governments' budget cuts totaling £1 billion ($1.25 billion) since 2010. Additionally, they cited "surging inflation," coupled with escalating expenses in adult social care and dwindling business rates income, as culprits in creating a dire financial predicament.
Conversely, Tory councillors within the council placed the blame on Labour for their mismanagement of public finances.
This dire financial situation comes on the heels of the council's revelation in June that it must allocate up to £760 million to resolve historic equal pay claims.
Notably, Birmingham is home to approximately 1.1 million residents.
Birmingham is not alone in facing this financial turmoil, as Croydon Council in south London issued its own Section 114 notice in November of the previous year, grappling with a £130 million budget deficit. Similarly, Thurrock Council in Essex, located east of London, declared itself in financial distress in December of the same year.
SIGOMA, an alliance of 47 urban councils within the Local Government Association, issued a stark warning last week, indicating that one in 10 of its member councils were contemplating the necessary admission that they have no foreseeable prospect of achieving fiscal equilibrium. Shockingly, nearly 20 percent expressed their intent to take the same step within the upcoming year.
The compounding factors of soaring inflation, rising energy costs, and mounting wage demands have only served to exacerbate the cuts in government funding allocated to essential services.
In response to Section 114 notices, councillors must convene within a 21-day window to formulate a budget that involves necessary austerity measures to curtail spending.
Stephen Houghton, chairman of SIGOMA, emphatically stated, "The government must acknowledge the substantial inflationary pressures that local authorities have had to contend with in the past 12 months." He went on to emphasize the broken state of the funding system, asserting that councils have been performing financial feats for the past 13 years, but now find themselves with no recourse.
