Levelling Up Secretary Michael Gove has announced he will appoint commissioners to take over Birmingham City Council and launch a local inquiry into the authority after it declared itself effectively bankrupt.

The cabinet minister said residents and businesses in the city “deserve better” after the council issued a Section 114 notice.

He said his intervention package “is formed of two complementary parts”.

“First, I propose to issue statutory directions to the council and to appoint commissioners to exercise certain functions of the council as required,” he told the Commons.

“And second, I intend to launch a local inquiry to consider the more fundamental questions around how Birmingham got to this position and options for how it can become a sustainable council moving forward that secures best value for its residents.”

The commissioners will oversee the day-to-day running of the council and scrutinise its financial governance and decision making, Mr Gove said.

Under their oversight, the local authority will have six months to prepare and agree an improvement plan “to return it to a sustainable financial footing”.

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Mr Gove said: “I do not take these decisions lightly but it is imperative in order to protect the interests of the residents and taxpayers of Birmingham, and to provide ongoing assurance to the whole local government sector.”

Birmingham council effectively declared itself bankrupt after being hit with a £760m bill to settle equal pay claims.

The Labour-run council is the largest local authority in Europe, comprising 101 councillors (65 Labour, 22 Conservative, 12 Liberal Democrat and two Green).

Mr Gove went on to say that although he believes strongly in local government, “when failures of local government occur, we must act”.

However Angela Rayner, Labour’s new shadow levelling up secretary, said there were questions for central government to answer as she pointed out other local authorities were also in financial distress.

She said a string of councils declaring bankruptcy in recent years had been “caused by the Conservative’s wrecking ball”.

“Local authorities across the country are struggling. After 13 years he can’t seriously say that it is all their own fault. Perhaps he can confirm that only one council issued a section 114 notice before his party took over in 2010, but since then eight councils have issued notice, with warnings that another 26 councils are at risk of bankruptcy over the next two years?

“So can he tell us, why have so many local authorities of all political stripes already issued section 114 notices on his watch?

“And this isn’t a one-off. So can I ask him, what work his department is doing to support local authorities that are warning of financial distress now?

“The truth is, this crisis in local government has been caused by the Conservative’s wrecking ball, with every swing another local council is pushed to the brink, and another local community falls over the edge.

“That is the difference between us. A Labour government would oversee sustainable long-term funding for councils, and we would work with local authorities and push power and wealth and opportunity out of Westminster.”

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