A plan is being hatched to allow councils to fund equal pay compensation claims through capitalisation or borrowing.
Councils are facing huge costs after solicitor Stefan Cross targeted a series of northern councils, leading to hundreds of equal pay tribunals (LGC, 28 May).
According to a union source, Mr Raynsford recognised that back pay is a significant one-off cost, in addition to the ongoing effects of equal pay structures, and may allow councils to capitalise or borrow money to fund it. However, Mr Raynsford is understood to expect each council to justify its case.
The ODPM has made no formal statement, but a spokesperson said: 'We have given no general undertaking to permit capitalisation in relation to back-pay awards. The government will only allow authorities to treat revenue expenditure as capital in the most exceptional cases of financial difficulty when all other options have been explored. All requests, including any relating to equal pay, are considered on this basis.'
Unison senior national officer Heather Wakefield said: 'It seems they are going to allow councils to either borrow or capitalise back pay. But each council will have to make an application to be allowed to do it.'
Redcar & Cleveland BC has 400 staff at tribunals. Chief executive Colin Moore said: 'We have a capitalisation directive from the ODPM to cover the costs of these cases.'
He added: 'We are one of the first top-tier councils in the country to conclude a single-status agreement with a trade union. It includes compensation for people who sign a compromise agreement not to go to a tribunal.'
More than 2,000 staff have signed the agreement, and have received compensation from the council's own resources.
He added that other councils in Teesside were trying to do the same.
The compensation agreement has cost the council£3.5m, the tribunals will cost£2m and the increase in the annual pay bill will cost£1.8m. However, without the agreement, the total costs would have been in excess of£20m.
Employers' Organisation executive director Rob Pinkham said: 'Authorities faced with substantial back-pay liabilities as a result of the threat of litigation want the maximum financial flexibility. Anything that can be done to increase that is a good thing.'