Birmingham City Council rocked by equal pay bill of up to £760 million

The local authority has been hit with a bill of between £650 million and £760 million for its equal pay liability, which has prompted a spending freeze and an apology from the council for the failure to get the situation under control as it faces one of its biggest ever challenges.

The news of the bill follows refreshed analysis from the Oracle financial system, which revealed that significant additional equal pay costs would need to be provided for by the council.

It has provoked furious responses from the opposition Conservative Group for what their leader Councillor Robert Alden described as yet another financial disaster at the council, and from the GMB union, who said the "shocking" confession from the council proved they were right to campaign for equal pay for years.

Government officials and external auditors are now helping the council work out what happens next and the city council, which has a £2.2 billion annual budget, must work out how to meet its liability, which may reach as high as £14 million a month.

A statement released on the Birmingham City Council website issued an apology and said the council would look at what it could do going forwards.

It read: "A detailed and fresh analysis of the council’s ongoing equal pay claims has been conducted in light of issues raised as a result of the implementation of the Oracle financial system.

"The council has already paid out a total of £1.1bn in relation to the settlement of Equal Pay claims over the last decade.

"However, the refreshed analysis has revealed that significant additional Equal Pay costs will need to be provided for by the council.

"It is estimated that as of 31 March 2023 the council’s current equal pay liability is in the region of £650m and £760m with this liability continuing to accrue at an estimated rate of between £5 million and £14 million a month.

"Given the huge sums involved the council cannot afford to pay this from existing resources, including reserves.

"To put the scale of this financial challenge in context, the council’s entire revenue budget for a year stands in the region of £750m, which is used to fund services across the city."

The statement added: "This is one of the biggest challenges this council has ever faced, and we apologise for the failure to get this situation under control.

"It means there will be significantly fewer resources available in the future compared to previous years and we will need to reprioritise where we spend taxpayers’ money.

"We have already taken action, including engaging with our external auditors and we have held discussions with officials at the Department of Levelling-Up, Housing and Communities.

"These discussions remain ongoing as the council looks to explore a number of possible solutions.

"Enhanced governance will be put in place to monitor the situation, including a panel of elected members, Chaired by the Leader of the Council, with the support of an independent expert in local government finance.

"The Chief Executive and Interim Director of Finance have begun work to develop a Budget Recovery Plan.

"A values framework will be introduced to inform the difficult choices and the council's focus will remain on tackling social injustice and inequality.

"Further updates, including proposed spending controls, will be shared in the very near future."

Michelle McCrossen, GMB Organiser, said: “GMB members in Birmingham City Council have been campaigning for equal pay for years, because we believed that the council’s pay scheme discriminates against its women workers.

"Today’s shocking confession from the council proves that we were right to do so.

“The council has fought our union every step of the way, defending their discriminatory pay scheme at tribunal hearings and refusing to release pay information.

“Now we can see why. The extent of the discrimination is far worse than anyone could have imagined, and it’s clear the council has learned nothing from their shameful history of undervaluing women’s work.

“Today’s explosive admission from the Chief Executive completely blows apart the Council’s legal defence, so it’s now time for them to get serious about meeting with GMB and repaying the wages stolen from their low paid women workers.

“GMB will continue to fight until our members get what they’re worth.”

Councillor Robert Alden, Leader of the Opposition and Birmingham Local Conservatives, said: "The Council have cancelled three meetings regarding equal pay in recent months, seemingly as they had no developments.

"Yet now we know Labour have run up a £760 Million plus bill and hidden it from the taxpayers of this city.

"This is because of Labour's failure to take action over the last decade.

"They cannot even claim to have not been aware of this since, as Labour Councillors, they not only have briefings from officers, but they also happily shared union claims that the Council wasn't paying staff fairly.

"Despite being in control, Labour failed to actually deal with the issue and stop it from continuing, leading to this shocking debt building up under Labour's watch."