Europe’s largest local authority is to launch a judge-led inquiry to determine who is to blame for it accruing an equal pay bill worth up to £760 million.

Birmingham City Council estimated that it had an equal pay liability of between £650 million and £760 million as of March 31 this year, which was rising by between £5 million and £14 million a month.

The Labour-led council has already paid out £1.1 billion in equal pay settlements after a ruling by the Supreme Court in 2012, but has now been forced to implement “mandatory spending restrictions” which will see “non-essential spending” ended immediately.

The council also said on Wednesday that it will launch the judge-led inquiry to understand the causes of the equal pay bill and who is to blame, which is set to begin in 2024.

Councillor John Cotton, leader of the council, 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.”

Cllr Sharon Thompson, deputy leader of the council, said the bill was “one of the biggest challenges this council has ever faced”, but added the council will do “everything we can to protect the services our residents rely on”.

The council said on June 28 that it could not afford to pay the outstanding liability from existing funds and reserves, with its entire revenue budget for all services annually standing at around £750 million.

It apologised for its failings but said it would mean “there will be significantly fewer resources available in the future” as it re-prioritised spending.

The judge-led inquiry will begin following the conclusion of a separate governance review, which was also announced on Wednesday.

The review, to be launched this week, will be independently chaired and will focus on failures in the implementation of the council’s new IT system, Oracle ERP.

Birmingham City Council said it will have to reprioritise its spending (Joe Giddens/PA)
Birmingham City Council said it will have to re-prioritise its spending (Joe Giddens/PA)

The BBC reported that the system was introduced to help modernise and speed up payment, HR and other internal processes.

But errors in its implementation left the council with another bill to fix the system, estimated to be at around £100 million according to a council report, of which £46.53 million has been requested for this year.

The BBC also said in June that the errors led to several transactions needing to be dealt with manually, creating a backlog which meant accounts for 2022/23 could not be closed and one school was even visited by bailiffs.

Speaking following the announcement of the review, Cllr Robert Alden, leader of the opposition and Birmingham Local Conservatives, said: “News that even more external support is needed, after a decade of help propping up this failing Labour administration, shows just how incapable the Labour administration is now seen as across the country.

“It is clear that these Labour cuts are just the start and thanks to the Labour cabinet failing to do their jobs properly, residents are in for years of suffering as Labour slash vital services to pay their debt off.”