05 October 2007
Town halls and trade unions are demanding that the Department for Communities and Local Government expands a one-off capitalisation of revenues to help councils meet £3bn in equal pay claims across England.
Senior officials at the Local Government Employers this week told Public Finance that they want local government minister John Healey to offer a second and third tranche of 'capitalisation directions' for 2007/08 – or face the prospect of councils delaying major projects, or cutting services, in order to fund their equal pay obligations under the Single Status agreement.
Healey announced on September 28 that 46 of the English authorities with large equal pay liabilities would receive £500m in capitalisation directions that would free up cash to meet their financial obligations under equal pay laws.
Under the plan, backdated equal pay costs will be treated as capital expenditure, allowing the authorities to borrow more cash or sell capital assets to finance the claims. Healey told PF that the deal meant councils could spread equal pay costs over years rather than take a one-off hit under Single Status, which required councils to make significant progress by July 2007.
'We recognise that the financial position for many councils is tough. But the capital directions for 2007/08 are substantially higher than the [£200m] approvals last year, showing that we are giving councils the flexibility to help themselves,' he added.
Healey's decision was praised by the Local Government Association and trade unions representing thousands of affected staff. But John Sutcliffe, principal strategy adviser at the Local Government Employers warned that other councils would demand similar treatment.
'The permissions that have been granted for 2007/08 should not be sniffed at – this is a substantial increase. But hundreds of councils with substantial liabilities couldn't bid for capitalisation directions before the June deadline because they were still negotiating their liabilities with lawyers and trade unions.
'We'll be doing all we can to lobby John Healey and his team for other bids to be allowed over the course of 2007/08. Some councils face the prospect of having to sell off assets or to delay major local projects or services if they cannot free up more money this year,' Sutcliffe said.
Sutcliffe said that the LGA had expressed 'mild concerns' that councils faced difficult political decisions, 'such as the sale of school playing fields', if they could not borrow more to fund claims.
Despite the introduction of equal pay laws 30 years ago, up to 75% of female local government suffer from a gender pay gap, whereby they are not paid equivalent rates for similar or identical roles for men.
Following a legal judgement in July, the DCLG ordered laggard councils to re-engage in 'meaningful negotiations' with staff and lawyers in order to meet their liabilities, which will see many town hall employees receive payments backdated for six years. The LGE estimates the liabilities at £3bn, while some staff could receive £20,000 each.
A spokeswoman for Unison said Healey's announcement represented a 'significant breakthrough' in trade unions' battle for equal pay. But one senior union negotiator said he would continue to lobby for an extension of the capitalisation approvals to other councils.
'Inequitable pay does not just affect the staff at the 46 authorities identified by the DCLG. It is a legal requirement and all councils should be given assistance to help them meet that requirement,' he said.
Brian Strutton, general secretary of the GMB, took a different view. 'This extra money means that no council has an excuse for pay discrimination any longer,' he said.
Councils in receipt of new capitalisation directions include the cities of Birmingham, Nottingham and Sheffield. County councils with large liabilities, such as Cumbria, also feature.
Also on the list are a number of the authorities – including Redcar & Cleveland Borough Council- that have been dogged by tribunals involving 'no win, no fee' lawyers opposing employers or trade unions for failing to negotiate full backdated payments to staff.
Many of the 46 councils have received directions for a third of their total claim. York City Council, for example, will be allowed to raise £526,000 of its £1.5m bill.
York's leader, Steve Galloway, warned the remainder would 'still be met by taxpayers.'
PFoct2007
