National living wage could cost councils £1bn

Chancellor George Osborne announced in his Summer Budget that a new national living wage of £7.20 an hour for over 25s would be introduced from next April, rising to £9 an hour by the end of the decade. The Local Government Association (LGA) has calculated that it will cost an initial minimum of £340 million a year for local authorities to introduce in 2016, with these costs continuing to rise significantly by 2020.

LGA statistics have indicated that 95 per cent of the local government workforce currently earn more than the £7.20 National Living Wage. However, there are 92,820 employees, mostly part-time council workers which would equate to just over 30,000 full-time staff, earning less. These include street cleaners, school crossing patrol and school dinner staff.

The LGA is reporting that increasing their pay to meet the new rate would cost £6.8 million, leaving an estimated £330 million needed in 2016 to cover increased contract costs to home care and residential care providers in order for them to pay council care staff the National Living Wage.

Cllr Gary Porter, LGA Chairman, said: "Almost half of local authorities already pay staff the voluntary Living Wage. This not only helps support those on the lowest pay but also improves the motivation, loyalty, productivity and retention of hard-working council staff.

"Local authorities have made £20 billion in savings since 2010 and are likely face further funding reductions and spending pressures over the next few years. It is vital that these costs are considered by the government in the wider debate of council funding.

"If government were to fully fund the cost of introducing the National Living Wage to council staff and care workers, councils could avoid extra financial pressure being placed on them as they continue to protect services, such as caring for the elderly, collecting bins and filling potholes."

The Department for Communities and Local Government (DCLG) said ministers would continue to listen to the views of councils in the run-up to the next local government settlement.

A spokesman for the DCLG said: ”Street cleaners, school dinner staff and care workers have as much of a right to a fair wage as anybody in this country and local government employers will recognise this and the contribution made by these hard-working people in their areas.

"Councils have worked hard over the past five years to deliver a better deal for local taxpayers, however, like the rest of the public sector will have to continue playing their part in tackling the deficit to ensure the economic recovery continues."

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