The equal pay scandal that drove Birmingham Council to the edge of bankruptcy

Birmingham City Council effectively filed for bankruptcy on Tuesday. Credit: PA

Birmingham City Council has been issued a 114 notice which means no new expenditure is allowed, apart from statutory.

It's effectively declaring itself bankrupt - not affecting private shareholders or customers, but the residents of one of the biggest cities in the country. 

Senior council figures tell me they’ve been effectively under these conditions for two months since they laid out plans to stop non-essential spending. 

And the big driver of that? Failures on equal pay.

Recently the council (which previously had to sell off the NEC and pay a billion pounds because of this) admitted it faced potential liabilities on equal pay of up to another £760 million.

The sums are jaw-dropping.

It is because of years of female dominated jobs being paid less than male ones.

The types of jobs that are being challenged as undervalued and underpaid are carers, teaching assistants and caterers. 

The GMB Union, which is taking a lot of these cases, has given me examples of practices it is challenging as discriminatory. They include male jobs getting better time off, bonuses, and other perks.

But a big factor is that these jobs have become so much more skilled over the years, without the pay keeping up. 

Obviously this is not the only issue - insiders point to austerity cutting a billion a year from their budgets and controversy around the roll out of the Oracle IT database system. 

Birmingham isn’t alone in struggling with finances.

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).

Chair Sir Stephen Houghton, said the councils' funding system was completely broken despite them "working miracles" over 13 years. 

And Birmingham isn't alone on equal pay either.

This summer, ITV News revealed that - following massive (financially crippling) equal pay cases in Birmingham and Glasgow - the GMB union is gathering evidence in 20 more councils.

ITV News Deputy Political Editor Anushka Asthana revealed last month that hundreds of women had launched fresh equal pay claims against councils across the UK

We revealed how 550 cases have been lodged with the mediation service Acas across two councils in Cumbria, 200 in Coventry and 400 in Dundee.

And there are huge councils about to be hit as well. 

The union told me it didn't want to bankrupt councils - it wants to find solutions to tackle years of unequal pay. 

GMB Union said Tuesday's decision comes the day before council representatives were expected to appear at the Employment Tribunal to defend their job evaluation scheme against thousands of equal pay claims. 

GMB Organiser, Michelle McCrossen, 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 even 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." 

They said today's news will be worrying for staff and residents. 

Equal pay cases are happening across retail as well.  

We revealed leaked documents that show a boost for the 55,000 claimants taking on Asda - where male dominated distribution centres have higher wages than the shop floor.

But councils are not private organisations - this impacts big time on all of us.

Labour MP Clive Betts, who chairs the local government parliamentary committee, told me non essential spending might be the regularity of bin collections, or grass cutting or whether your local library stays open.

He said councils are on their knees and can't cope with equal pay liabilities alone. So far, there has been little sign of the government stepping in - with the prime minister saying he wasn't bailing out council mismanagement.

But these are public services and the problems could be countrywide. 

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