Section 114 Notice
On Tuesday, Birmingham City Council issued a Section 114 notice, which means that they are effectively bankrupt. Under the Local Government Finance Act 1988, the notice must be issued if a council's chief financial officer believes it doesn't have enough money to meet its spending commitments from its income.
This is a declaration that they no longer have the finances for any new spending, except for vital services, such as protecting vulnerable people and statutory services.
There are several strains on the budget of the Birmingham City Council, which has led to their inability to meet financial liabilities.
One of the heaviest strains on their budget is equal pay claims, which Glasgow is also currently struggling with. The council has paid almost £1.1bn in equal pay claims and has had to sell the NEC to meet this amount.
The Oracle IT database system has created further financial distress. An astounding total of £119 million has been spent on the issues and installation of this system, which was “crucial to an organisation of Birmingham City Council’s size,” the spokesperson outlined.
Increases in demand for adult social care, reductions in business rates income, the impact of inflation, and cuts to local government funding have also contributed to Birmingham’s struggle.
Birmingham City Council is not alone in their 114 notice. Sigoma represents municipal authorities in 47 urban areas and it said one in 10 of its councils are considering making a 114 notice (effectively declaring bankruptcy) in the UK.
Plan of Action
Since July, the council ended all new expenditure spending with immediate cutbacks.
Long-term considerations to ease the financial distress of the Birmingham City Council include a cancellation of both the annual Christmas Market and the 2026 European Championships, which are due to be held in Birmingham.
John Cotton, the council leader, has clarified that whilst “tough and robust decisions” are required, vital services will be maintained with “additional support” from the government. Governmental aid will also be provided in an emergency meeting this September, where a plan of action will be created to tackle Birmingham City Council’s financial struggle.
Edited by: Anwen Venn
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