Councils may be counting cost of Budget

DESPITE George Osborne’s restriction of public-sector pay rises to one per cent for the next four years, Scotland’s councils may still be counting the cost of his Budget. While you would think the Chancellor’s limit on salary increases for publicsector staff would make the impact of the Budget easy to assess, that is not necessarily the case. As a result of the contracting out of jobs in several areas, public-sector budgets may be affected in surprising ways.

Take care homes. Local authorities routinely commission the provision of places for elderly people in residential care, as well as the provision of home-care packages from charities and the private sector. Councils have often driven a hard bargain, securing rates which both the third sector and private businesses say can make it impossible to pay workers a fair salary.

The phasing in of Mr Osborne’s National Living Wage could change all that. An increase in pay for the care sector was not exactly unforeseen. The national care-home contract negotiated between councils and private providers was calculated this year on the basis of an expected increase in the national minimum wage, to a rate of £7 an hour. So the Chancellor’s £7.20 is not a catastrophic problem.

But £9 an hour by 2020 is a much bigger challenge, even though all parties to the carehome contract aspire to pay a living-wage level. It will be vital those parties (the Scottish government, Cosla and the care-home industry) continue to work towards a proper living wage, rather than just paying Mr Osborne’s legal minimum.

And it is not just care. There are questions for authorities such as Glasgow which have moved significant chunks of their payroll to arm’s length organisations (Aleos) where pay rates may remain below living-wage level without compromising a public commitment to pay all council staff the living wage.

Another crucial factor will be whether Mr Osborne has shifted the definition of a living wage. The level he has set it at is similar to that called for by the Joseph Rowntree Foundation, which calculates an annual minimum income necessary for a manageable standard of living. Such calculations depended on households being able to claim tax credits which the Budget savaged.