Birmingham City Council has estimated its combined actual and potential equal pay settlements from 2007/08 to 2011/12 at £757m and warned that this liability could increase further if it receives more claims.
Publishing its annual audit letter, the local authority admitted that the issue of affordability presented a major challenge to the council.
It said its liability had been “considerably worsened” by the developments in equal pay case law. In particular, it cited the impact of the Supreme Court’s recent decision that equal pay cases could be brought not only in the employment tribunal, where the time limit for bringing claims is six months, but also in the civil courts, where the limit is six years.
The letter added: “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.”
Birmingham said it would need to borrow to make equal pay payments, repaying the debt over 20 years. It forecast that by 2015/16 the council may be paying around £75m per annum to finance this debt.
The council said it shared the concern of its external auditor, who issued an equal pay value for money qualification to its report, about the increase in claims, “which impact on its financial resilience and the resources available to deliver services”.
Last month Birmingham said it expected to have to make savings increasing cumulatively to more than £600m per annum in the six years period from 2011/12 to 2016/17. It said equal pay was one of the major cost pressures included in these projections.