Birmingham City Council has issued a section 114 notice under Local Government Finance Act 1988 (“Act”) after finding that it cannot meet its financial liabilities resulting from equal pay claims of around £760m.
What is a section 114 notice under the Act: Section 114 (3) dictates that: “The chief finance officer of a relevant authority shall make a report under this section if it appears to him that the expenditure of the authority incurred (including expenditure it proposes to incur) in a financial year is likely to exceed the resources (including sums borrowed) available to it to meet that expenditure”.
The effect of Section 114 notice is that no new expenditure is permitted, with the exception of that funding statutory services, including safeguarding vulnerable people, however existing commitments and contracts will continue to be honoured. Any spending that is not essential or which can be postponed should not take place and essential spend will be monitored.
Section 114(3) also requires that an Extraordinary Meeting of the Full Council must happen within 21 days at which the Council must agree a response that addresses the issues outlined within this report. As per the notice the meeting will be held on 26.09.2023.
The Official Statement issued by the Birmingham City Council reads as below:
“Birmingham City Council has issued a s.114 Notice as part of the plans to meet the Council’s financial liabilities relating to Equal Pay claims and an in-year financial gap within its budget which currently stands in the region of £87m.
In June the Council announced that it had a potential liability relating to Equal Pay claims in the region of £650m to £760m, with an ongoing liability accruing at a rate of £5m to £14m per month.
The Council is still in a position where it must fund the equal pay liability that has accrued to date (in the region of £650m to £760m), but it does not have the resources to do so.
On that basis the Council’s Interim Director of Finance, Fiona Greenway, (s.151 – Chief Finance Officer) has issued a report under section 114(3) of the Local Government Act, which confirms that the Council has insufficient resources to meet the equal pay expenditure and currently does not have any other means of meeting this liability.
The Council will tighten the spend controls already in place and put them in the hands of the Section 151 Officer to ensure there is complete grip. The notice means all new spending, with the exception of protecting vulnerable people and statutory services, must stop immediately.
The Council’s senior Officers and Members are committed to dealing with the financial situation and when more information is available it will be shared.”
Notice Copy:
