Equal pay claims against Birmingham City Council are set to total at least £757m and will present a major financial challenge, the authority has revealed.
In its draft statement of the 2011/12 accounts, published yesterday, the council said it had prepared for ‘actual and potential’ equal pay claims from staff working at the authority between 2006/07 and 2011/12.This follows a Supreme Court ruling last month that 174 former employees of Birmingham City Council could pursue equal pay claims.
The group of 170 women and 4 men claimed the council denied them pay and benefits awarded to colleagues of the opposite sex for work rated as equivalent. The group missed the six-month deadline for pursuing their case in an employment tribunal, but the judges have allowed them to pursue a claim through the civil courts.
Birmingham warned that the ruling had ‘considerably worsened’ the council’s exposure to equal pay claims.
Auditor Grant Thornton’s annual letter, published along with the statement, stated that it intended to qualify the accounts due to the risk of the equal pay challenges. This will be confirmed when the council’s full audit is published in February.
The audit letter concluded that auditors were satisfied with the council’s arrangements for securing value for money, but added there could be an ‘increasing impact’ of equal pay claims.
However, the letter added that the council managed its finances well in 2011/12, with good budgetary control exercised and significant progress made on this year’s savings plans.
Responding to the audit report, the council said it was considering the implications of the auditor’s recommendation for both its 2013/14 budget and future financial strategy.
In a statement, the authority said it shared the auditor’s concern about the increase in equal pay claims, which could hit resources available to provide services. It plans to make £120m of savings in 2013/14, and ‘equal pay is one of the major cost pressures included in these projections’ for next year, it added.
The council also warned that it would be likely to need to borrow to make such payments, repaying the debt over 20 years. By 2015/16, the town hall will be paying around £75m a year to finance this debt, it predicted.
