UK's second biggest city Birmingham declares financial insolvency
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00:00 Britain's second biggest city has effectively declared itself bankrupt
00:04 this week after revealing an £87m deficit for the financial year.
00:09 Birmingham City Council has paused all essential services and its leaders say
00:14 tough decisions will have to be taken in the days ahead. With more details here's
00:19 our UK correspondent Benedicte Pervieux.
00:23 Birmingham City Council is in fact the largest local authority in the whole of
00:29 Europe. The fact that it has declared itself bankrupt of course in effect
00:34 bankrupt is very worrying news and the Labour-run council has defended itself
00:40 it says it serves more than 1 million people. Yes it has had to issue what is
00:46 called here a section 114 due to what they call unprecedented
00:52 unprecedented financial challenges and therefore it means that it can no longer
00:57 balance its financial books, its budget, it certainly cannot commit to any new
01:03 spending and it largely blames its financial predicament on outstanding
01:08 equal pay claims worth up to £760m more than its annual budget for
01:16 services. So it announced last month that it was facing a budget shortfall for
01:21 2023 to 2024 of over £164m, even worse the year after and that by
01:31 issuing in fact this notice it was committed to stripping back its spending.
01:38 The reality is that across England and Wales, across the UK, many other local
01:44 councils are in difficulties, certainly in England and Wales some are under severe
01:49 financial pressure as a result of whether it's rising social care costs,
01:53 certainly soaring inflation and reduced income. But the reason as I alluded to
02:00 that Birmingham is under, it says it's under additional strain, it's because of
02:03 these equal pay claims. Liabilities apparently are really increasing every
02:09 month alarmingly between £5m and £14m so it's just unable
02:15 to absorb that cost even with its reserves. And what's interesting is you'll
02:21 remember that Birmingham last year hosted the Commonwealth Games. Well one
02:25 of the top former advisors there was saying that that was a huge mistake to
02:30 do this in the light of these legacy financial woes.