City Council forced to set aside £757m to settle equal pay claims
BIRMINGHAM City Council has been forced to set aside at least £757m from its budget to settle equal pay claims brought by mainly women who took legal action against the authority because they were not paid as much as men for doing the same job.
In a test case last month 174 women won a ruling at the Supreme Court over the unfair pay.
The £757m will make a massive dent in the council’s plans to cut public spending. It has already said it is faced with having to make cuts of £600m in order to balance the books.
In its annual audit letter, the council said the equal pay situation represented a “major challenge” to its finances because it would have to borrow to meet obligations.
The council has forecast that by 2015/16 it could be paying £75m a year to finance the debt.
The letter states: “Regarding the Equal Pay Value for Money qualification, the council shares the auditor’s (Grant Thornton) 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 council’s accounts from 2006/07 to 2011/12 reflect combined actual and potential equal pay settlements totalling £757m (including the effect of recent case law) and this liability could increase further if more claims are received by the council. The affordability of this presents a major challenge to the council.”
The council said the £600m costs savings would have to be spread over six years from 2011/12 to 2016/17 and represented around 48% of the total spending over which the council has control. More than £120m of the savings will be delivered in 2013/14.
“Equal pay is one of the major cost pressures included in these projections. The council needs to borrow to make equal pay payments, repaying the debt over 20 years. We forecast that by 2015/16 the council may be paying around £75m per annum to finance this debt,” it added.
The council said its liability had also been considerably worsened by the developments in the equal pay case law.
“Recently, the Supreme Court has delivered its decision that equal pay cases can be brought not only in the Employment Tribunal, where the time limit for bringing these claims is six months, but also in the Civil Courts where the time limit is six years. As a result of this decision, which was a majority decision by three judges to two, there is a further potentially significant cost implication for the council, and indeed for other public and private sector employers,” it said.
Elsewhere in the letter, the council said auditors were satisfied with the council’s arrangements for securing value for money, with a qualification regarding the increasing impact of equal pay claims.
“The Annual Audit Letter is clear that the council continues to manage is finances well, with a positive performance in its budgetary control for 2011/12, and has a continued focus on the delivery of this year’s savings plans,” it said.
