Living wage could rise by 10.5% as inflation hits councils

The national living wage could rise by 20% in two years, alarming senior finance officials who are in the eye of the inflationary storm.

There are fears that councils may need to make further service cuts as they face rising costs for heating their buildings, as well as significant price increases in many other areas.

The Low Pay Commission, which advises the government on minimum and living wage levels, is consulting on whether the National Living Wage should rise to £10.32 (in the range of £10.14 to £10.50 £) in April 2023 – an increase of between 6.7% and 10.5%.

It could then rise to £11.33 for 2024, an increase of almost 20% in two years. At the same time, the age threshold for the National Living Wage is set to rise from 23 to 21 by 2024 at the latest.

The problem particularly affects councils on the national pay scale, rather than those that have established their own local pay scale to follow.

Councils are reluctant to become national living wage employers and so far their national wage scale has always been deliberately set at a higher level.

But doubts are now being cast as to whether this can continue. A council chief told LGC: ‘It remains to be seen whether the sector will manage to continue to pay more than the national living wage.

They said: “If salaries continue to rise very sharply, you end up at the bottom of the pay scale – you end up paying them the same as people in higher jobs, including their supervisors. All kinds of problems are created by this.”

While inflationary pressures for fuel, heating and lighting also weigh heavily on the minds of finance officers, staff remuneration accounts for 70% of council costs and living wage increases are putting particular pressure on councils who buy at their expense.

A month ago, last year’s pay rise was finally set at 1.5% and unions and national employers are soon to start wage negotiations for 2022.

Salary discussions for 2023 to 2024 will not begin until this year’s settlement is finalized, which is not expected to happen until April 2023. However, all salary discussions will be heavily influenced by future increases. provided for in the national living wage.

“Negotiators don’t want to agree a set of increases for 2022 and then when a living wage announcement is made for 2023, the lowest pay points are totally inconsistent with that,” the chief said.

“The 2022 and 2023 pay deals will have to address the cost of living issue and perform some bottom-loading of the pay offer, so the increase for the lowest pay points will be greater than that of all others. He may have to raise 10%, while everyone else gets a 4% pay rise.

While the Low Pay Commission’s consultation was only released on March 28, planned living wage increases have been of concern for some time.

Naomi Cooke, Employers’ Secretary, wrote to council chief executives in February about the “ongoing challenge we face in ensuring that the [National Joint Council] the wage backbone is able to absorb the impact of large annual increases in the national living wage.

“All the options to meet the [national living wage] will drive up costs for councils and therefore divert money from other critical compensation issues including the agenda of these high level councils such as government workforce capacity local.

Geoff Winterbottom, senior research fellow at the Municipal Authorities Special Interest Group (Sigoma), said its members were “really, really worried about the implications of the commissions’ forecasts on low wages”.

“A pay rise of this magnitude would hit us really hard and if this pressure is not taken into account in the regulations, the councils will really struggle to come up with the money.

Mr Winterbottom said authorities should start planning to budget for such pay rises this summer to prepare not to be caught off guard in years to come.

Another source of local government funding said the national living wage was a ‘big factor’, especially for social care providers, presenting a ‘perfect storm’, coming on top of rising fuel prices. energy and at the right cost of care reforms that should also leave the councils. in the pocket.

“Finance officials will be thinking very seriously about contingency plans depending on how this unfolds,” they said.

David Phillips, associate director of the Institute for Fiscal Studies, told LGC that the councils and the government were faced with “tricky decisions”.

He said: “The spending review regulations now look a little less generous than they did last fall, given that inflation is much higher. Conversely, increases council tax which the government now allows represents a substantial reduction in real terms in the bills of local residents.

“Councils will now face higher costs – not least for their energy. But if the labor market continues to be so tight, it seems inevitable that wages for those working in the public sector or outsourced services will have to rise. – or services are likely to be So would spending more now make it harder to meet these future costs?”

Mr Philips suggested that as well as ‘increasing grant funding’, the Government ‘could also allow for larger council tax increases given that this year’s increases will be a reduction in real terms a lot larger than originally anticipated.

UNISON Local Government Leader Mike Short said: “There have been deep concerns for years about the downward drift in local government wages, particularly at the lower end. Workers are caught in a real cost of living crisis.

“As councils face a recruitment and retention crisis, they need to offer pay levels that make local government and schools attractive places to work.

“The unions are currently formulating their compensation request for 2022, which will be submitted in the coming weeks. Employers must act accordingly to ensure they continue to pay well above the legal minimum, for this year and years to come.

“But it does mean the government in Westminster needs to make a real and significant investment.”

Michael A. Bynum