Bosses at Labour-run Birmingham City Council ‘overstated’ the £760million equal pay bill which drove it to bankruptcy, it was claimed today.
The ‘false’ figure was ‘a figment of someone’s imagination’ and forced the authority to declare it was broke needlessly, local politicians, union leaders and academics said.
‘It was the rock that triggered an avalanche of misery that destroyed Birmingham’s reputation, caused real pain and hardship and destabilised the entire city,’ Liberal Democrat Councillor Paul Tilsley said.
‘It was clear to anyone who had any sense that the figure quoted had no credibility. Yet it was used to justify the council going bust and saying it had no money.’
Mr Tilsley, a veteran member of the council’s audit committee, is one of several critics to hit out after it emerged this week that the final equal pay settlement, hammered out between the authority and unions, would be around £250m – one third the original ‘guestimate.’
In September 2023, the council effectively declared itself bankrupt after calculating that it faced a £760m bill for liabilities relating to 6,000 workers.
The landmark legal case was launched by two trade unions after the authority admitted it had given bonuses to refuse collectors and street cleaners but not to cleaners and caterers – roles typically held by women.
However, critics repeatedly questioned the council’s estimated settlement figure, which was made public by then-council chief executive Deborah Cadman and supported by leader Councillor John Cotton, the council leader who was handpicked for the role by Keir Starmer.
Birmingham City Council has been accused of miscalculating the cost of equal pay claims and driving the authority into bankruptcy needlessly
Councillor John Cotton, the council leader who was handpicked for the role by Keir Starmer, approved the £760m equal pay liability figure
It effectively triggered £300million of spending cuts, record council tax rises and led to the ongoing pay dispute with striking bin workers, which has left the city’s streets strewn with waste and rat-infested for more than six months.
Freedom of Information requests questioning how the £760m figure was calculated were rejected despite several councillors, union members and academics all suggesting it did not add up.
James Brackley, a specialist at Sheffield University’s Audit Reform Lab, was among those who said the equal pay bill was ‘overstated’ and ‘prematurely released’.
In a report published last year, he blamed the council’s defective digital software operating system, known as Oracle, for the error and has since backed calls for a full public inquiry to uncover what really went on.
Mr Brackley said the council declared its bankruptcy based on a dire misunderstanding of the equal pay liability, a failure to properly account for its reserves and ‘a sense of panic’.
‘Birmingham should never have gone bankrupt,’ he said. ‘It didn’t need to.’
Even the council’s own accounts for 2023 and 2024 reveal it did not need to take the nuclear option and miscalculated its ‘General Fund’ position, he said.
Labour councillor Fred Grindrod, former chair of the audit committee, also previously criticised the explanations for the declaration of financial distress.
The scale of fly-tipping in the Moseley area of Birmingham pictured in September
Piles of rubbish rotting in the streets across the city as seen in Saltley in September
In a recent speech, he said: ‘The events of 2023 were catastrophic for Birmingham.
‘A disaster that damaged this city, its reputation, and its people.
‘A disaster that has left us cutting services for the most vulnerable, selling off assets, and telling our citizens their aspirations cannot be met.
‘To this day, we still do not know the full truth.’
At the time the Section 114 bankruptcy notice was issued, the council claimed ‘extensive discussions with external auditors, regulatory stakeholders, and leading King’s Counsel…have confirmed our assessment of our financial position.’
It prompted an immediate spending freeze before the then-Tory Government ordered commissioners in to take over the running of the authority, describing it as a failure.
Since then the council has shed more than 400 jobs, slashed services and spending on its communities, and sold off hundreds of millions of pounds-worth of assets.
It has also raised council tax by the maximum permissible for two years, totalling 21 per cent of rises.
The authority has also been embroiled in a bitter, long-running dispute over pay with bin workers, who have been on strike since March because of proposed pay cuts and plans to downgrade some job roles.
The council walked away from negotiations in July saying it could not improve its offer, partly due to fears it could open itself up to more equal pay claims.
In September, members of Unite voted to extend the strike until March 2026.
Unite general secretary Sharon Graham said: ‘This is a disgraceful tale of the council’s incompetence coupled with bad legal advice.
‘The victims and those that have paid the price are the bin workers and local residents.
‘The ongoing bin strike is a direct result of the council’s mismanagement of its finances.
‘Unite has repeatedly provided the council with expert legal advice to demonstrate it was making the wrong calculations on equal pay, but the council was too arrogant to even consider it.’
A spokesman for Birmingham City Council said: ‘The full terms of the settlement are confidential.
‘But the cost of the settlement falls within the limit of the exceptional financial support package agreed with the previous government in January 2024.’