Birmingham: UK's second largest city declares financial distress

The council of the UK's second biggest city, Birmingham, became Tuesday the latest local authority to declare financial distress, with the opposition blaming Conservative governments of years of under-funding.

Birmingham City Council in central England said it had issued a Section 114 Notice under the Local Government Finance Act 1988, which blocks spending on all but essential services.

Leaders of the Labour-controlled council -- one of Europe's largest -- called the move "a necessary step" to get spending back on a stronger footing.

They said "long-standing issues", including the roll-out of a new computer system, had been compounded by cuts of £1 billion ($1.25 billion) by successive Conservative governments since they came to power in 2010.

"Rampant inflation", alongside increases in the cost of adult social care and reductions in business rates income had also combined to create "a perfect storm", they added.

As it stands, the council said there is an £87 million "in-year financial gap" in its £3.2 billion-a-year budget.

In June, the local authority revealed that it has to pay up to £760 million to settle historic equal pay claims but does not have the resources to do so.

Tory councillors in the city, which is home to some 1.1 million people, blamed Labour mismanagement of public finances for the crisis.

In London, Prime Minister Rishi Sunak's official spokesman said Birmingham had received a more than nine percent increase in additional funding from a pot of £5.1 billion for local councils this year.

The department for local government has been in contact with the council and requested "assurances... about the best use of taxpayers' money", he told reporters.

"The government recognises that there are pressures that both central and local government face," he added but indicated it was an issue for Birmingham's leaders to resolve.