Bankrupt councils Labour chiefs gave £800m liability a zero risk rating

Labour chiefs at the now ‘effectively bankrupt’ Birmingham City Council were warned in advance that the authority could face equal pay claims estimated at ‘between £300m and £800m’ after more than 3,000 GMB members sued the council for its allegedly discriminatory pay policies.

The huge liability has been a key reason behind the council’s declaration that it could not balance its books and was on the verge of ‘bankruptcy’. 

However the council went on to set a budget for the year ahead that gave the liability issue a ‘zero’ risk rating – after council leaders allegedly didn’t share the scale of the issue with councillors – it has now emerged.  


Read more… Bankrupt council is proof you still can’t trust Labour, says Greg Hands

The council’s former leader Ian Ward, his then deputy Brigid Jones and current leader John Cotton were in an ‘inner circle’ of people who had been warned about the scale of the liability in “early February” by the city’s interim HR chief Darren Hockaday. 

The revelation emerged at a city council finance scrutiny meeting last week (Thursday, September 7).  It is claimed that the information about equal pay exposure was not shared with the council or other members.

The council subsequently went on to set its budget for the year ahead just weeks later. The budget did acknowledge that there was possibly a £270 million for equal pay liability – but said there was a zero per cent risk of it impacting its budget.

However, the liability is actually somewhere between £650m and £760m – and is growing at a rate of between £5 million and £14 million per month – the Council’s Chief Executive Deborah Cadman announced in June. 

This huge sum was a key factor in the council declaring, by issuing a Section 114 Notice, that it is effectively bankrupt and can’t manage its financial affairs. 

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The revelation that the city’s senior Labor leaders knew about the scale of the liability – and allegedly down-played it – has infuriated rival political parties in the city.  Birmingham Conservatives leader, Cllr Robert Alden,  pushed his Labour counterpart John Cotton to apologise to the people of the city, reported Birmingham Live.

“Apologise to the residents, to your colleagues and to the staff who are going to lose their jobs because this administration did not do their jobs,” demanded Alden. 

Cotton replied: “We all regret the situation we are in now – we now have to ensure we protect frontline services and tackle inequalities. We will take responsibility for those issues we are responsible for.”

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Tory Deputy Leader Cllr Ewan Mackey said: “Labour’s addiction to secrecy and unwillingness to face up to and tackle tough decisions is a big reason the council is in such as big mess and it is the residents of Birmingham who will be paying the price for this shameful behaviour for years, and even decades to come.”

Regarding the equal pay liability, GMB organiser Michelle MCrossen said last week: “After years of campaigning and years of stalling from the Council, Birmingham’s women workers will take strength from knowing that they will finally have their day in court.

“But Birmingham City Council doesn’t have to wait another 14 months to end the discrimination and settle this dispute – they should sit down with GMB and sort this out now.

“That would be the right thing to do for the thousands of women workers whose hard-earned wages have been stolen from them, but it’s also the right thing to do for the Council to save money and secure the future of the city’s services.

“It’s time for the Council leadership to finally do what’s best for Birmingham and deliver pay justice.”

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