A public inquiry into Birmingham City Council’s decision to issue a bankruptcy notice has been called for by financial experts.

An open letter to Community Secretary Steve Reed has been signed by 35 accounting experts and academics, raising questions about the section 114 notice issued by the local authority in 2023.

The letter claims that the notice was based on ‘unaudited’ and ‘materially incorrect’ accounting information.

In a supporting analysis, Dr James Brackley, a lecturer in accounting at the University of Glasgow, argues the council ‘appears to have both overstated its project budget deficits and materially underestimated its available funds’.

Dr Brackley said: ‘The accounts of Birmingham City Council now show that Birmingham was likely never bankrupt, with the scale of the accounting misstatements that led to the bankruptcy looking absolutely unprecedented.

‘There should now be an immediate pause on the council's asset sales programme and urgent questions must be put to Commissioners as to when they knew about the council's much stronger financial position and whether elected members and the wider public were misled.’

However, Birmingham City Council Commissioners have argued that claims that the council was in reasonable financial health are ‘entirely incorrect and based on a flawed analysis and a fundamental misunderstanding’.

They argue that it is only since the statutory intervention that the local authority has managed to make progress with its financial issues and, in particular, its equal pay liability.

Council leader Cllr John Cotton said: ‘My focus over the last two years has been on dealing with equal pay, the re-implementation of Oracle and with tackling a huge budget deficit. We continue to make progress on all three.’

He continued: ‘We're working with a Labour Mayor and a Labour Government to repair the damage of 14 years of crippling Tory cuts that cost Birmingham over £1bn, and under my leadership, this council has taken the tough decisions and decisive action required to return to the mainstream of local government.’

An MHCLG spokesperson said: ‘Birmingham City Council has made progress on its reform and recovery, but challenges remain, which is why commissioners continue to support the council to deliver for local people.’