Almost £400 million has been set aside by Birmingham City Council to settle equal pay claims from women workers.
But the huge sum may not be enough to deal with demands for back pay from 4,000 staff who were discriminated against.
A ground-breaking employment tribunal earlier this year found the council in breach of equal pay law.
The women, mainly care workers, school cooks and office cleaners, were underpaid compared to men carrying out similar work.
And under deals approved by trade unions, they were denied hefty bonuses which almost doubled the wages paid to the men.
Council leaders tried to settle the matter by offering the women up to three years back pay, but the tribunal ruling means they will qualify for six years.
The sum reserved to meet the claims – £380 million – has been borrowed by the council at a time when the city’s finances are under unprecedented pressure. The figure is considerably more than the £330 million that the council expects to have to cut from budgets over the next four years in response to the Government’s public spending squeeze.
City chief executive Stephen Hughes confirmed that £140 million has already been handed over in back pay.
Mr Hughes added: “The District Auditor is content that we have made sufficient provision to deal with potential liabilities.”
He admitted, however, it was possible the compensation bill could rise even further.
Mr Hughes said: “The problem in this area is that case law in the courts is constantly changing.”
Lawyers Stefan Cross, which represented council staff at the tribunal, estimate that the back-pay bill will be a minimum £615 million. If as many as 20,000 further claimants come forward the cost could rise to £3 billion, according to Stefan Cross.
That figure was condemned as a “gross over-estimate” by cabinet equalities and human resources member Alan Rudge.