Why did Birmingham City declare bankruptcy?
Bankruptcy means that a person, organisation, city, or state doesn’t have any money to spend. Recently, the second-largest city in the United Kingdom, Birmingham, declared itself “essentially bankrupt.” They stopped spending on things that aren't super important. They will spend only on things like adult social care, waste collection, library services, maintaining roads, etc.
In 2010, many women who worked in the local city government won a case. They had claimed that male employees got paid more than female employees. Since then, the council has had to pay about £1.1 billion for that case.
Right now, they owe £760 million, which keeps increasing every month. They also had trouble with an IT system. It was supposed to cost £19 million. But after three years of delay in its installation, the cost is expected to rise by around £100 million.
Now, the city council is saying they don't have any money left to meet their financial obligations and can't spend any more. People are also upset because they hosted the Commonwealth Games in 2022.
Can a city file for bankruptcy in the UK?
A council can't say they're bankrupt because they must provide important services to the public. If they think they aren’t able to meet its financial obligations, they must issue a "section 114 notice."
Some people call this "bankruptcy," but it's not really the same. It just means the city council doesn't have enough money to pay its bills. Birmingham issued this notice recently.
What happens when a city in the UK declares a Section 114 notice?
This notice means the council can't spend any more money. They also have to meet in 21 days to figure out what to do. Usually, they make a new plan to spend less money. Sometimes, the government can also help.
What happens next for Birmingham City?
Jeremy Hunt, the UK’s Chancellor of the Exchequer, has said the government will do what is right for the people of Birmingham. The council will meet this month to discuss what to do. They're also talking to the UK government and sharing information. We hope things get better soon and the people don't face any problems.
