Birmingham City Council has ceased non-essential spending “with immediate effect” as it tries to deal with significant additional equal pay costs of £760m and fix issues with its Oracle IT system.
The authority has announced that “in order to grip the council’s financial position”, mandatory spending restrictions will be implemented. Three strategic expert advisors will be appointed to strengthen Birmingham’s “capability and capacity”, and an independent governance review and an independently chaired internal management review will be commissioned.
Birmingham City Council reported last week that it faced additional equal pay costs estimated to be between £650m and £760m after already paying £1.1bn of pay claims. The pay claims are due to a Supreme Court ruling in 2012 which found that the authority had denied female workers bonuses given to male colleagues.
Alongside the equal pay costs, the authority plans to spend £100m to fix implementation issues with an Oracle IT system, which is impacting on its ability to close its 2022/23 accounts.
The IT system, created by database management company Oracle and customised for Birmingham City Council, was expected to go live in April 2020 and aimed to streamline the authority’s payments across its public services. However, elements of the IT contract have been delayed, including the council’s ability to issue invoices to businesses.
Sharon Thompson, Birmingham City Council’s deputy leader, said: “This is one of the biggest challenges this council has ever faced, and we must understand how the issues have arisen to prevent a repeat in the future.
“Given the scale of this challenge, we must impose mandatory spending restrictions. But as we have done throughout the cost-of-living crisis, we will continue to focus on tackling social injustice and inequality across our city. We will do everything we can to protect the services our residents rely on.”
Measures ‘essential to grip the situation’
Birmingham City Council stated that the three strategic expert advisors will be appointed to support the council’s directors and cabinet in relation to the following areas: industrial relations, financial resilience, risk management, good governance, culture change and service improvement, and digital and strategic IT implementation.
It also said that the independent governance review, in collaboration with the Department for Levelling Up, Housing and Communities, will focus on the Oracle implementation and equal pay claims, with the independently chaired internal management review focusing on understanding “the root causes of the failure to effectively implement Oracle”.
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John Cotton, Birmingham City Council’s leader, said: “I’ve been clear from day one that I will take whatever action is needed to address the substantial challenges facing the council and these measures are essential to grip the situation – particularly in terms of financial controls, organisational capacity and improved governance.
“We will be open and transparent throughout this process and the independent reviews and judge-led inquiry will ensure that there is proper accountability for these failings.”
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