By Richard Johnstone | 18 December 2013
More than half of the cost of meeting the pay claim made by local government trade unions would be recouped through higher revenues for the Treasury, a study has found.
A report by the New Policy Institute for trade union Unison concluded that, if local government employers approved the £1.20 per hour pay increase demanded by the national joint council for local government services, 55% would be returned to the Treasury. This would be the result of higher tax and national insurance contributions and lower spending on tax credits and benefits.
The increase in intended by unions to ensure that all local government workers are paid the Living Wage – set at £7.65 nationwide and £8.80 in London – from next April.
The report, published on the day of the local government financial settlement, concluded that central government would receive an additional £410m from higher tax payments and £190m from greater national insurance contributions, while spending £160m less on benefits. The NPI also estimated that indirect taxes on expenditure such as VAT would increase by £145m a year as a result of the higher earnings. This means the cost of introducing higher wages falls from an estimated £1.4bn to £645m.
Heather Wakefield, Unison’s head of local government, said paying all local government workers the Living Wage would also help to restore wages that have suffered a 18% real-terms cut since 2010.
‘No other group of public sector workers earns below the Living Wage,’ she said.
‘Politicians from all sides are calling for action to end low pay and introduce the Living Wage. If they are serious, they should put their own house in order and make sure that one million local government and school support workers are lifted out of poverty and given the £1.20 an hour increase we are calling for.’
The unions' original pay claim, made in October, was for a minimum of £1 an hour at each point on the pay scale. This would bring the lowest paid workers to the level of the Living Wage while also providing an increase for workers who have endured a three-year pay freeze.
However, the Living Wage increased last month by 20p to £7.65 and £8.80 in London and unions altered their claim to £1.20 an hour to reflect the new rate.
