Birmingham is Bankrupt: what does that mean and how did it happen?

Well it's bad news for Birmingham as the largest local authority in Europe has declared itself effectively bankrupt. We'll take a look here at what exactly that means for the second city, and what the effects of the news could be.

Birmingham City Council has declared itself effectively bankrupt. A budget shortfall, equal pay settlements worth hundreds of millions and an expensive IT system have all been cited as contributors to the situation.

To do this, the council declared a section 114 notice, which is when a local authority has judged itself to be in financial distress and is unable to balance its budget. This means all new spending must stop immediately, but essential services such as social care, waste collections and protecting the vulnerable will continue.

So, what next? Well it has been suggested that the council could sell off some of its assets to help with the bill. In Croydon, where a similar situation happened earlier this year, residents saw an increase in council tax of 15% to help ease the council's financial burden.