Birmingham city council, the largest local authority in Europe, has effectively gone bankrupt.
On Tuesday it issued a Section 114 notice preventing all but essential spending. It will mean job cuts and wrecked services.
As the crisis broke, John Cotton, Labour leader of the council, was “on a long-planned short break to mark a major birthday”.
Disgracefully, the Labour council leaders tried to blame workers fighting for equality for the crisis.
They linked the financial collapse to a huge bill to settle equal pay claims. The only reason that the council owes money is that for years it has paid women less than men doing comparable jobs.
Justice, equality and compensation for past discrimination should be basic principles for a Labour council.
The council issued the section 114 notice the day before its representatives were expected to appear at an employment tribunal to attempt to defend their job evaluation scheme against thousands of equal pay claims submitted by GMB union members employed by the council.
Chief executive Deborah Cadman said in June that the council owed between £650 million and £760 million to its workers to settle its equal pay liability, adding that the figure was growing by between £5 million and £14 million every month.
The council’s latest estimate places the liability at over £1 billion.
Michelle McCrossen, GMB organiser, said, “Today’s announcement is a humiliating admission of failure on the part of Birmingham City Council’s officials and leadership.
“Not only are they responsible for creating this crisis through years of discriminating against their own staff, but they no longer believe themselves capable of fixing it.
“For decades the council has stolen wages from its low paid women workers, running up a huge equal pay liability that has brought Birmingham to the brink.
She added that now “Thousands of city employees will be worrying for the future of their jobs and of the essential services that they provide for the people of Birmingham. GMB will continue to fight for pay justice for our members, and to ensure those responsible for this crisis are held to account.”
The council is also facing financial pressures due to problems with the implementation of its Oracle IT system. Intended to streamline council payments and HR systems, the flagship system was expected to cost £19 million. But after three years of delays it admitted in May it would cost up to £100 million.
The big picture is Tory cuts, and Labour’s failure to fight them. The Tories have savaged local councils, bleeding them of money and forcing them to cut services.
But those councils, many led by Labour, have utterly failed to launch a fightback.
Birmingham council said on Tuesday it had “£1 billion of funding taken away by successive Conservative governments”.
True, but why didn’t the council fight? Why didn’t it defy the cuts, and mobilise the workforce and the people of Birmingham to demand extra cash?
Instead it acted as the government’s bailiffs.
Unions must fight all the cuts now, and demand cash from the government to save services and jobs. But crucially they must not back off at all from the battle for equality.
The battle for equal pay
The Birmingham women workers’ case started in 2008 when the Labour government introduced “single status” deals in the name of equal pay.
The deals were supposed to deliver a common pay scale and harmonisation of conditions for all jobs.
But then-chancellor Gordon Brown didn’t give local authorities any extra money to pay the workers who were supposed to gain from the deal.
So in the name of equal pay, many local councils harmonised women’s and men’s wages—downwards—and cut services.
Birmingham became the centre of the resistance to the local government employers. Tens of thousands of council workers struck. There were also protests in Waltham Forest, Leeds, Edinburgh, and Islington.
Later Glasgow workers struck to win a big battle over equality.
Timeline of a crisis
April 2010 – 5,000 mainly female Birmingham City Council staff win their case for equal pay at an employment tribunal
October 2012 – The council loses an appeal over the case as the Supreme Court rejects the council’s argument the claims should have been made within six months of staff leaving jobs
2012-2023 – The council pays £1.1 billion settling equal pay claims
May 2023 – A new leader of the council, John Cotton, replaces Ian Ward after a report criticises the
28 June 2023 – The council says it is in talks with the government after revealing it has to pay an additional £760 million over equal pay claims
5 July 2023 – All non-essential spending halted by the council
24 July 2023 – Rishi Sunak rules out a bailout for the council
21 August 2023 – Council launches a redundancy scheme asking all its more than 10,000 staff if they want to leave