It’s the second largest city in England and it just effectively declared bankruptcy. There are multiple problems that have contributed to this situation but one near the top of the list is a settlement over equal pay.

Birmingham City Council, which provides services for more than one million people, filed a Section 114 notice on Tuesday, halting all spending except on essential services.

The deficit arose due to difficulties paying between £650 million (around $816 million) and £760 million (around $954 million) in equal pay claims, the notice report says.

What will this actually mean for residents? No one is quite sure yet only that it will mean cuts in services, increased taxes or both.

Birmingham residents have been warned “all bets are off” on what services could be cut after the city council declared itself effectively bankrupt.

The Labour-run council might have to shut libraries, lessen the frequency of bin collections or raise council tax after it issued a section 114 notice – meaning it cannot meet its financial liabilities…

In June, the council revealed it had paid almost £1.1bn in equal pay claims in the last 10 years after it lost a case at the Supreme Court in which female employees said they were not paid bonuses that were awarded to men on the same pay grade.

Leaders on the Labour-run council also blamed a few other things, calling the current moment a perfect storm of problems.

In their statement Cotton and Thompson said the authority was facing financial woes because of issues with its Oracle IT system.

“Like local authorities across the country, it is clear that Birmingham city council faces unprecedented financial challenges, from huge increases in adult social care demand and dramatic reductions in business rates income, to the impact of rampant inflation,” they said, lamenting a “a perfect storm” for local government.

The statement added: “We implemented rigorous spending controls in July, and we have made a request to the Local Government Association for additional strategic support.

Naturally, the opposition is making hay out of this:

The council last year published a financial plan described as a “bold budget” designed to “maximise the potential of a golden decade for the city”, ahead of the arrival of the Commonwealth Games that took place in Birmingham last summer.

In a council meeting on Tuesday morning, Robert Alden, the leader of the Conservative opposition, accused the council of “lying to the people of Birmingham”.

“This administration claimed that under Labour Birmingham was facing a golden decade. This was fools’ gold. It is cloud cuckoo land to claim the problems in Birmingham are being replicated across the country,” he said.

As you’ll see in this clip, this isn’t the first city to file a section 114 but it is the largest. The city is probably in for several years of belt tightening before it can clear the rest of this equal pay settlement debt.