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Birmingham city council faces £757m bill to settle equal pay claims Birmingham city council faces £757m bill to settle equal pay claims
(about 1 hour later)
The country's largest local authority said it faces a potential bill of £757m to settle a string of equal pay claims lodged by mainly women workers, amid speculation that other councils and private sector firms could be targeted by a new wave of legal action. The country's largest local authority faces a potential bill of £757m to settle a string of equal pay claims lodged by mainly women workers, amid speculation that other councils and private sector firms could be targeted by a new wave of legal action.
Birmingham city council said on Monday the figure reflected combined "actual and potential" equal pay settlements between 2006 and 2012, including a recent ruling in favour of more than 150 low-paid women staff, and could rise if more claims are made. Birmingham city council said on Monday the figure combined the "actual and potential" equal pay settlements between 2006 and 2012, including a recent ruling in favour of 170 low-paid women staff, and could rise if more claims were made.
The council has applied to the secretary of state for communities and local government, Eric Pickles, for permission to borrow £325m on top of the £430m already secured to help fund the pay claims. The council has applied to the local government secretary, Eric Pickles, for permission to borrow £325m on top of the £430m already secured to help fund the pay claims.
The Birmingham city council leader, Albert Bore, said if permission was refused the costs would have to be taken from the council's day-to-day running costs, putting it at risk of bankruptcy. The council leader, Sir Albert Bore, said the costs would have to be taken from the council's day-to-day running costs, putting it at risk of bankruptcy if permission for the loan was refused.
An annual audit letter assessing the council's financial performance said the city had settled a proportion of its equal pay liability, but had outstanding liabilities estimated at £541m.An annual audit letter assessing the council's financial performance said the city had settled a proportion of its equal pay liability, but had outstanding liabilities estimated at £541m.
In a statement issued after the audit letter was made public, the local authority said: "The council shares the auditor's concern about the increase in equal pay claims against the council, which impact on its financial resilience and the resources available to deliver services. The affordability of this presents a major challenge." The local authority said: "The council shares the auditor's concern about the increase in equal pay claims against the council, which impact on its financial resilience and the resources available to deliver services. The affordability of this presents a major challenge."
Birmingham recently warned that the bleak outlook for council funding means it might have to make £600m in cuts by 2017, potentially reducing its services to core "priority" areas such as adult social care and child protection. Bore warned that the scale of the cuts marked "the end of local government as we know it." Birmingham has warned that the bleak outlook for council funding means it might have to make £600m in cuts by 2017, potentially reducing its services to core "priority" areas such as adult social care and child protection. Bore said the scale of the cuts marked "the end of local government as we know it."
The £600m cuts figure included estimates of equal pay liability cost pressures, the audit letter says. It says the council will have to borrow to finance the payments, and forecasts that by 2015/16 the costs of this will be around £75m a year. Although the council has a "robust" system in place to manage the costs, future liabilities are "unclear," the letter notes. The £600m cuts figure included estimates of equal pay liability cost pressures, the audit letter says. It says the council will have to borrow to finance the payments, and forecasts that by 2015-16 the costs of this will be about £75m a year. Although the council has a "robust" system in place to manage the costs, future liabilities are "unclear," the letter notes.
The statement comes two weeks after a group of around 170 women workers, including cooks, cleaners and care staff, won an equal pay case against the council that lawyers said would have "serious ramifications" for employers. The statement comes two weeks after a group of 170 women workers, including cooks, cleaners and care staff, won an equal pay case against the council that lawyers said would have "serious ramifications" for employers.
In its ruling, the supreme court effectively extended the time workers have to bring equal pay compensation claims from six months to six years. The supreme court effectively extended the time workers have to bring equal pay compensation claims from six months to six years.
Birmingham city council had tried to block the claims, arguing they should be taken to employment tribunals, which have a six-month time limit. But former employees persuaded judges they could bring claims in civil courts, where there is a six-year limit. Birmingham city council tried to block the claims, arguing they should be taken to employment tribunals, which have a six-month time limit. But former employees persuaded judges they could bring claims in civil courts, where there is a six-year limit.
Chris Benson, of Leigh Day & Co solicitors, who is representing the women in their equal pay fight, said: "These ex-council workers, taxpayers themselves, are clearly concerned about the size of the equal pay problem and the bill Birmingham city council faces. However, the council are in this position because they unlawfully underpaid their staff and chose to spend money fighting this case.Chris Benson, of Leigh Day & Co solicitors, who is representing the women in their equal pay fight, said: "These ex-council workers, taxpayers themselves, are clearly concerned about the size of the equal pay problem and the bill Birmingham city council faces. However, the council are in this position because they unlawfully underpaid their staff and chose to spend money fighting this case.
"Birmingham council should now do the decent thing and pay these women the money they are owed."Birmingham council should now do the decent thing and pay these women the money they are owed.
"The council for many years saved money by underpaying staff, and it is clear now the focus should be on early settlement rather than continued litigation they cannot win.""The council for many years saved money by underpaying staff, and it is clear now the focus should be on early settlement rather than continued litigation they cannot win."
Carolyn Miller, legal director at international law firm Pinsent Masons, said the announcement could spark further claims, potentially costing the public sector billions of pounds: "We would not normally expect to see large numbers of people coming forward but given the publicity this case had originally, I would anticipate individuals to have made enquiries to ascertain whether or not they too can claim. Carolyn Miller, legal director at international law firm Pinsent Masons, said the announcement could spark further claims, potentially costing the public sector billions of pounds: "We would not normally expect to see large numbers of people coming forward but, given the publicity this case had originally, I would anticipate individuals to have made enquiries to ascertain whether or not they too can claim.
"Monday's announcement will further drive that and I'm sure having such a significant price attached to the case will spark an interest in people speaking to their unions or lawyers just to check whether they could make a claim themselves.""Monday's announcement will further drive that and I'm sure having such a significant price attached to the case will spark an interest in people speaking to their unions or lawyers just to check whether they could make a claim themselves."
In its annual letter to Birmingham city council, auditor Grant Thornton, said the city was managing its finances well, overspending by £2.4m during 2011/12 in the context of a £3.5bn revenue budget. But the auditor expressed concern that an increase in equal pay claims against the council had continued to "negatively impact on its financial resilience" and its wider delivery of value for money. In its annual letter to Birmingham city council, auditor Grant Thornton said the city was managing its finances well, overspending by £2.4m during 2011-12 in the context of a £3.5bn revenue budget. But the auditor expressed concern that an increase in equal pay claims had continued to "negatively impact on its financial resilience" and its wider delivery of value for money.