Birmingham could be first of many councils to face financial crisis, warns mayoral candidate

Richard Parker said he had been contacted by a number of local authorities across the Midlands who said they were in danger of running out of money.

Last month Birmingham City Council, the largest local authority in the UK, gave notice that its projected expenditure was likely to exceed its resources.

It was issued with a notice under Section 114 of the Local Government Finance Act, which means that it can only spend money on meeting existing financial commitments and providing essential services.

The authority said the financial crisis was caused in part by a £760 million pay claim following a court ruling which found the authority had unfairly denied bonuses to workers in female-dominated occupations.

In June, it emerged the £760 million equal pay liability was not only equivalent to the entire annual spending on services but was growing each month. It said the bill was rising at a rate of £5 million to £14 million per month, but had insufficient resources to meet the liability.

Mr Parker said it remained to be seen why Birmingham had found itself in such difficulties, but thought it was probable that other authorities in the region would face similar measures.

He declined to identify which councils were at risk.

"I would be very interested to know how the figure for the equal-pay claim has reached the level that it has," said Mr Parker, speaking to the Express & Star following a working lunch with business leaders hosted by the Oldbury-based Richardson group.

"I think the public relations has been handled badly, and has allowed the media to say Birmingham Council is bankrupt, which it is not," Mr Parker added.

"We will have to wait to see whether the problems that Birmingham have faced are down to poor-decision making, or general funding of local authorities.

"But I have been contacted by a number of local authorities across the wider Midlands, and I think we will see a number of councils being issued with Section 114 notices by default.

"Rising costs, particularly with regards to adult social care, and underfunding mean that a number of authorities across the country are going to have the same problems."