Financial Distress Announced In Britain’s Second Biggest City

The UK’s second-largest city announced on Tuesday that it is unable to balance its accounts, blaming Conservative governments for years of underfunding.

Birmingham City Council in central England said that it has issued a Section 114 Notice under the Local Government Finance Act 1988, which prohibits spending on anything other than essential services.

Leaders of the Labour-controlled council termed the measure a necessary step toward getting expenditure back on track.

They said that long-standing issues, such as the implementation of a new computer system, had been exacerbated by cuts totaling £1 billion ($1.25 billion) made by consecutive Conservative governments since their election in 2010.

They stated that rampant inflation, together with rises in the cost of elderly social care and decreases in corporate rates income, had created a perfect storm.

Conservative councilors, on the other hand, criticized Labour’s mismanagement of public funds. The council stated in June that it will have to pay up to £760 million to resolve old equal pay claims.

Birmingham has a population of 1.1 million people.

Croydon Council in south London issued a Section 114 notice in November of last year due to a £130 million budget gap.

Thurrock Council in Essex, east of London, announced financial trouble in December of last year as well.

SIGOMA, a federation of 47 LGA urban councils, said last week that one in ten of its members was considering making the required admission that they have no chance of balancing their budgets.

Almost 20% stated they would do the same in the coming year.

According to the report, high inflation, rising energy prices, and wage demands have compounded government budget cuts to key services.

Councillors must meet within 21 days of receiving a Section 114 notice and draft a budget that makes the necessary changes to reduce spending.

“The government needs to recognize the significant inflationary pressures that local authorities have had to deal with in the last 12 months”, said SIGOMA chairman Stephen Houghton.

“The funding system is completely broken”, he continued. “Councils have worked miracles for the past 13 years, but there is nothing left”, he added.

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