Birmingham, the UK's second-largest city, declared bankruptcy on Tuesday, sending shockwaves through its governance. The Labour-run administration issued a Section 114 notice, halting all but essential spending, becoming the latest council to face financial distress.

The city's financial troubles are primarily linked to an equal pay claim. Birmingham City Council owes £760 million ($955 million) in equal pay claims to female government employees who were historically paid less than their male counterparts. Although the council paid out £1.1 billion to female workers, it still carries a liability of £650-750 million, accruing at a rate of £5 million to £14 million monthly. The city now anticipates an £87 million deficit for the 2023-24 financial year.

"The Council has insufficient resources to meet the equal pay expenditure and currently does not have any other means of meeting this liability. The notice means all new spending, except for protecting vulnerable individuals and statutory services, must cease immediately," said the Birmingham City Council.

This bankruptcy has been years in the making. Claims date back to 2012 when 170 women, including teaching assistants, cleaners, and catering staff, won the right to proceed with equal pay claims. They argued that the council failed to provide them with the same benefits and payments as male counterparts doing equivalent work.

The council also attributes its financial troubles to the expenses of a new cloud-based IT system by Oracle, funding cuts by successive Tory governments, inflation, rising demand for adult social care, and a significant drop in business tax income.

While the government provided extra funding, approximately 10% of the council's budget, Birmingham's bankruptcy reflects the immense financial challenges faced by local governments across the UK. Hosting events like the Commonwealth Games exacerbated its financial strain, according to a former adviser to Birmingham City Council.