Europe’s largest local authority Birmingham City Council issued a section 114 notice freezing all expenditure except that necessary to protect essential services.
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Council leader John Cotton said “tough and robust decisions” would need to made on cuts to services and funding for large-scale events such as the 2026 European Athletics Championships.
He told media that he would pay for “child protection and social care, adult social care, education, waste collection, street maintenance and library services” for the city’s 1.1 million taxpayers.”
The leader said he came to know about the financial crisis along with other councilors during the cabinet meeting on Tuesday morning.
In an earlier statement, he and the Labor authority’s deputy leader, Sharon Thompson, said the move was a “necessary step as we look to get our city back on a strong financial footing”.
A Section 114 notice, previously issued by other councils including Croydon and Thurrock, means a local authority has deemed itself to be in financial trouble and can no longer balance its budget.
The council’s financial pressures are also due to problems in implementing its Oracle IT system.
To streamline the council’s payments and HR systems, the flagship system expected to cost £19m. But after three years of delays it revealed in May that it could cost up to £100m.
“It is clear that Birmingham City Council is facing extraordinary financial challenges, from a huge increase in demand for adult social care and a dramatic fall in business rates income to the effects of rampant inflation,” Mr Cotton and Ms. Thompson said in a statement.
“We implemented tighter spending controls in July, and we’ve asked the Local Government Association for additional strategic support.”
Section 114 was crucial to being able to “build a stronger city for our residents”, he added, pledging to protect the “most vulnerable”.
The authority said a further extraordinary meeting would be held on September 26. And discussions with the government’s Department for Leveling Up, Housing and Communities (DLUHC) would continue in the coming months to finalize the mechanism for financing the liability.
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Mr Cotton said: “My priority now is to ensure we have a financial recovery plan that can meet the huge demands placed on the council and continue to provide the services the city relies on.”