Birmingham City Council has effectively declared bankruptcy after being hit with a £760m bill to settle equal pay claims.
The council said it had issued a section 114 notice, confirming that all new spending, with the exception of protecting vulnerable people and statutory services, must stop immediately.
In a statement declaring itself in financial distress, the local authority said it 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 Labour-run council is the largest local authority in Europe, comprising 101 councillors (65 Labour, 22 Conservative, 12 Liberal Democrat and two Green).
The statement read: “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 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.”
It added: “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.”
Sky’s Midlands correspondent Becky Johnson said the council has been in talks in recent months over the management of finances in Britain’s second city and the equal pay crisis.
It comes after a Supreme Court ruling back in 2012 found in favour of mostly female employees of Birmingham City Council – and that a bonus scheme that was handed out to staff in certain roles favoured those which were mainly taken up by men.
Johnson said: “They have been paying out these claims over the years, but the bill is now increasing by about £14m a month and currently stands at £760m – and is just not money the council can afford to spend.
“We know over the summer they stopped essential spending to try to meet this bill – they tried to do this without taking this measure.”
She said the implications of the section 114 notice are “serious”, adding there will be a huge reduction in investment from the council in the city while it tries to figure out how it is going to pay the bill.
Political fallout
“Now this has provoked a huge political row,” Johnson added. “The leader of the Conservative group is accusing the Labour-led council of failing to get a grip of the equal pay issue, and accused them of lying to the public that things were looking rosier than they were financially over recent years.”
Councillor Robert Alden, leader of the Conservative opposition, said: “Labour’s failure in Birmingham has become clear for all to see. What Labour pledged as a golden decade ahead to voters in 2022 turns out to be based on budgets in 20/21 and 21/22 that did not balance and were unfunded.
“Combined with Birmingham Labour’s refusal to deal with equal pay over the last decade this has created this mess where residents will now lose valuable services and investment.”
He added: “Birmingham Labour have no grip of their mess and no ability to fix it, hence why the final say on spending control has now been removed from the Labour political leadership.”
Downing Street said the move by the council will be “concerning” for residents.
Prime Minister Rishi Sunak’s official spokesman said: “Clearly local government is vital to our communities and we know they have been facing pressures. The government for its part has stepped in to provide support, an additional £5.1bn to councils in 23/24, which is more than a 9% increase for Birmingham City Council.
“Clearly it’s for locally elected councils to manage their own budgets, I know the department has been engaging regularly with them to that end and has expressed concern about their governance arrangements and has requested assurances from the leader of the council about the best use of taxpayers’ money.”
He acknowledged Birmingham has a “particular issue around equal pay settlements” and said ministers have “commissioned an independent governance review which will report in the coming weeks”.
“It will be concerning for the people of Birmingham and it is important that the council provide reassurance and deliver on what has been requested by the department,” he added.
Other councils which have effectively declared bankruptcy
Hackney Council issued a section 114 notice in 2000, with Northamptonshire County Council following suit in 2018.
Croydon council issued its third section 114 notice in two years in November 2022, while Thurrock in Essex took the step in December last year after it got into difficulties over borrowing large sums to invest in solar energy.
Woking also issued a section 114 in June this year due to what it said was “an extremely serious financial shortfall owing to its historic investment strategy that has resulted in unaffordable borrowing, inadequate steps to repay that borrowing and high values of irrecoverable loans”.
Martin Lewis says motorists who were mis-sold car finance are likely to receive “hundreds, not thousands of pounds” – with regulators launching a consultation on a new compensation scheme.
The founder of MoneySavingExpert.com believes it is “very likely” that about 40% of Britons who entered personal contact purchase or hire purchase agreements between 2007 and 2021 will be eligible for payouts.
“Discretionary commission arrangements” saw brokers and dealers charge higher levels of interest so they could receive more commission, without telling consumers.
Image: Pics: PA
Speaking to Sky News Radio’s Faye Rowlands, Lewis said: “Very rarely will it be thousands of pounds unless you have more than one car finance deal.
“So up to about a maximum of £950 per car finance deal where you are due compensation.”
Lewis explained that consumers who believe they may have been affected should check whether they had a discretionary commission arrangement by writing to their car finance company.
However, the personal finance guru warned against using a claims firm.
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“They’re hardly going to do anything for you and you might get the money paid to you automatically anyway, in which case you’re giving them 30% for nothing,” he added.
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Who’s eligible for payout after car finance scandal?
Yesterday, the Financial Conduct Authority said its review of the past use of motor finance “has shown that many firms were not complying with the law or our disclosure rules that were in force when they sold loans to consumers”.
The FCA’s statement added that those affected “should be appropriately compensated in an orderly, consistent and efficient way”.
Lewis told Sky News that the consultation will launch in October – and will take six weeks.
“We expect payouts to come in 2026, assuming this will happen and it’s very likely to happen,” he said.
“As for exactly how will work, it hasn’t decided yet. Firms will have to contact people, although there is an issue about them having destroyed some of the data for older claims.”
He believes claims will either be paid automatically – or affected consumers will need to opt in and apply to get compensation back.
The FCA says you may be affected if you bought a car under a finance scheme, including hire purchase agreements, before 28 January 2021.
Anyone who has already complained does not need to do anything.
The authority added: “Consumers concerned that they were not told about commission, and who think they may have paid too much for the finance, should complain now”.
Its website advises drivers to complain to their finance provider first.
If you’re unhappy with the response, you can then contact the Financial Ombudsman.
Any compensation scheme will be easy to participate in, without drivers needing to use a claims management company or law firm.
The FCA has warned motorists that doing so could end up costing you 30% of any compensation in fees.
The FCA estimates the cost of any scheme – including compensation and administrative costs – to be no lower than £9bn.
But in a video on X, Lewis said that millions of people are likely to be due a share of up to £18bn.
The regulator’s announcement comes after the Supreme Court ruled on a separate, but similar, case on Friday.
Image: Waves break on the sea front in Blackpool. File pic: PA
A wider yellow warning – covering the North of England and Northern Ireland – is also active between 6am this morning and 11.59pm tonight.
Train operator LNER has warned passengers not to travel north of Newcastle, while Avanti West Coast has advised its customers not to travel north of Preston as it will be “heavily affected” by the weather.
“We’re expecting heavy rain and high winds to result in disruption of services,” LNER said in a statement.
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Some trains have already been cancelled in Scotland, with Network Rail saying several lines will be closed from 12pm. Other routes will run with a reduced timetable and longer journey times.
Among the routes set to close at midday are Edinburgh to Fife, Perth to Dundee, and Aberdeen to Inverness, as well as the West Highland Line.
The storm could also lead to road closures – and several ferry services have already been cancelled by Scottish operator CalMac.
The Met Office said that much of Scotland, particularly western coastal areas, will be battered by heavy rain and windy conditions.
Image: Pic: Met Office
The strongest gusts are expected this afternoon and into the evening – but a Met Office spokesperson warned “there remains some uncertainty in the depth and track of Floris”.
Sky News’ weather presenter Jo Wheeler said: “Storm Floris is likely to bring a spell of weather not usually associated with the height of summer.
“Travelling across the Atlantic, this otherwise unremarkable, low-pressure system will cross a powerful jet stream, exiting on the cold side, renowned for storm formation.”
She said inland gusts of 50mph to 60mph are widely possible, potentially reaching 80mph to 90mph over exposed coasts, hills and bridges.
“The rain associated with this storm will largely clear through early tomorrow, but it’s as the rain goes that the winds start to strengthen,” she warned.
Almost two months after Air India Flight 171’s deadly crash, some of the 53 British nationals on board are only now being laid to rest.
Some 300 friends, families, and locals from the Gujarati community in and around Londongathered in Wembley for a prayer and memorial service dedicated to remembering some of the victims.
Wearing his father’s emerald ring that was miraculously recovered from the wreckage, Miten Patel addresses the crowd.
His parents, Ashok and Shobhana Patel, were travelling back to their home in Orpington, Kent, after a spiritual trip to India, when they were killed in the crash on 12 June.
Their funeral was held only days ago, after being delayed following the discovery that the remains of other individuals were found in Miten’s mother’s casket.
Image: Ashok and Shobhana Patel were among 241 who died in the Air India plane crash
He credits Professor Fiona Wilcox, the senior coroner at Inner West London Coroner’s Court, for meeting with him and his family to break the news.
“My parents were the first ones repatriated in the UK,” Miten explains – he organised the repatriation of his parents before he flew out to Ahmedabad.
“When they were back home, the first thing that they did was a CT scan. And that’s when it came about, the CT scan showed that with mum’s remains, there were further remains there too.
“I don’t know what they were. I don’t know how many.”
Image: The remains of other individuals were found in Miten’s mother’s casket
Miten’s parents’ funeral was attended by hundreds. His father, Ashok, was a financial adviser and his mother, Shobhana, was a retired microbiologist.
As the eldest son, organising much of his parents’ farewell fell to him. The concern around his mother’s remains delayed the family’s chance to grieve.
“I think there should be a level of responsibility taken. Why did that happen? Where was the flaw in that process? I mean I do understand that whole situation, people were rushing, people were very tired.
“You know, to get all the remains, then having to separate them by DNA, it’s a long process. But really, for us as loved ones, it is very upsetting.”
Indian government spokesman Randhir Jaiswal previously said the country was “working closely with the UK side from the moment these concerns and issues were brought to our attention”.
“In the wake of the tragic crash, the concerned authorities had carried out identification of victims as per established protocols and technical requirements,” he said. “All mortal remains were handled with utmost professionalism and with due regard for the dignity of the deceased.
“We are continuing to work with the UK authorities on addressing any concerns related to this issue.”
The flight crashed moments after take-off en route to Gatwick, killing 241 people on board. Horrifying images were beamed around the world within minutes.
Confusion and fear spread like wildfire among relatives back in the UK, who immediately tried to get hold of their loved ones.
It was a family member of Komal Patel’s who called her after seeing the images on the news.
There was only one flight out of Ahmedabad back to London that day, and she had only just been texting her brother Sunny and his wife Monali, who’d been on holiday.
The events of the past few weeks have been unfathomable.
Image: Sunny and Monali Patel were about to celebrate their 10-year anniversary
In her first interview about her brother and her sister-in-law, Komal explains how she flew out to India with her cousin Jina to go and identify her little brother.
“Because we weren’t really allowed to see the body, I don’t think I’ve really come to terms with it. I still think I’m dreaming and it’s not really real,” Komal tells us.
Sunny and Monali Patel were in their 30s and about to celebrate their 10-year anniversary.
Image: Komal Patel flew to India with her cousin Jina to identify her little brother
The couple were the “light” and “soul” of their families.
They loved having fun, playing with their nieces and nephews and adored travelling. Komal says her brother loved barbecues and her sister-in-law worked with children and adored hers too.
“They’re just really fun, exciting, really lived life, just made memories, just made everyone really happy,” says big sister Komal.
“They were like the heart of my kids. Whenever they walked into a room, they just filled up the room with laughter and happiness.”
Image: A photo of Sunny and Monali Patel, who died in the Air India plane crash, on display at a vigil
The couple had been due to fly back home to London a week beforehand but postponed their flight.
“It has just been very traumatic, very, very sad for us, losing Sunny and Monali at 39 years old,” says their cousin Jina.
“They were full of life and brought so much light into our family. As a family, we’re devastated at why two people so young, with so much energy, who brought so much into our families have just sort of gone in one day.”
A joint funeral for the husband and wife was held a fortnight ago and like hundreds of families impacted by this tragedy, the family are now rebuilding a foundation that has been shattered.