Birmingham, the second-largest city in Britain, has effectively declared itself bankrupt and has closed all non-essential spending after receiving equal pay claims totaling £760 million, equivalent to "954 million dollars."

The Birmingham City Council, which serves over a million people, issued a Section 114 notice to halt all spending except for essential services.

The notice report stated that the deficit arose from difficulties in paying between £650 million (about $816 million) and £760 million (about $954 million) in equal pay claims.

The city now expects to suffer a deficit of £87 million ($109 million) for the fiscal year 2023-24.

Sharon Thompson, the council's vice-chair, informed council members on Tuesday that it faces "long-standing issues, including historical concerns related to equal pay liability," according to British news agency PA Media.

Thompson also partly blamed the ruling Conservative Party in the UK, stating that Birmingham "received a billion pounds in funding taken by successive Conservative governments."

Meanwhile, Conservative council members blamed the mismanagement of public funds by Labour.

A spokesman for British Prime Minister Rishi Sunak told reporters on Tuesday, "It is clear that locally elected councils are the ones managing their own budgets."

The spokesman added that the government "regularly engages with them for this purpose, and expressed concern about their management arrangements and requested assurances from the council leader regarding the optimal use of taxpayers' money."

Council leader John Cotton told the BBC elsewhere that a new job model will be presented to the council to address the equal pay claims bill.

The British newspaper "Daily Mail" revealed that Birmingham City Council had a series of extravagant expenditures before it had to declare itself effectively bankrupt.

The newspaper added that Birmingham City Council spent millions on a failed IT system and spent an additional £184 million on its costly attempt to organize the Commonwealth Games, injecting over £50 million back into hydrogen buses and bike lanes.

The newspaper pointed out that Birmingham City Council spent £13 million on the 2026 European Athletics Championships, along with undisclosed expenses on a series of "inclusive" street signs and an ambitious "greenways" plan.

Council leader John Cotton, who was carefully selected for this role by Keir Starmer to manage the authority, faced criticism for spending his 50th birthday vacation in New York while his council was bankrupt.

One senior counselor warned that the heads of the civic bodies that hosted the Commonwealth Games last summer would divert vital attention and resources away from addressing long-term financial struggles - with Birmingham and its partners expected to bring in £184.2 million for the games.

Former counselor Max Caller stated that the event was a "very significant challenge" for the troubled authority and said that councils facing problems need to focus on correcting the basics instead of spending millions on large events.

The financial collapse in Birmingham, Britain, has sparked anger among local residents, who feared the collapse of vital services like garbage collection, while Conservatives blamed "bureaucratic inefficiency" by Labour for causing the bankruptcy disaster.

The crisis has raised new speculation that the city's 1.1 million residents will face a 10% increase in council tax, as seen when other authorities found themselves in similar straits, with angry local residents attacking council heads over the financial failure.