Half of councils have not factored a proposed 2% pay increase for most staff into their budgets for next year, with many reporting implementation of a new wage structure will place significant pressure on their finances, LGC research has revealed.
Last month negotiating body National Employers voted in favour of a 2% pay rise for most council employees, with larger increases for lower paid workers due to the introduction of a new national living wage, despite warnings it could lead to further job losses and service cuts.
Meanwhile, the Association of Local Authority Chief Executives & Senior Managers last week submitted a pay claim that matches the 2% pay offer made to general council staff. It cited “pressures” on chiefs and a need to retain “leadership of the highest quality”.
LGC asked all top-tier councils whether a 2% pay increase for most council staff had been factored into their budgets for 2018-19 and what the expected cost would be.
Despite councils previously being advised to plan for an increase in the pay bill of between 4% and 6% over a couple of years, 34 of the 62 councils which responded said the pay offer did not currently form part of their budget plans for next year.
Of the councils with no current budget plan for the pay offer, 31 provided a figure for expected costs. This revealed an expected extra total financial burden of £39.7m in 2018-19, with 18 councils reporting they are expecting the pay rise to cost £1m or more.
Of those, seven have estimated costs will rise above £2m in 2018-19 with Kirklees Metropolitan Council reporting it will need to find an additional £2.7m. Kirklees told LGC it expects the extra wage costs to rise again to £6m in 2019-20, when the introduction of a new pay spine due to the national living wage will wipe out almost a third of salary points.
Leicester City Council and Calderdale MBC also revealed they are preparing for the cost of pay increases to double, from £1m to £2m, in the next two years.
Peterborough City Council said a 2% pay increase would cost £0.4m in 2018-19. A spokesperson said: “We could only consider a 2% increase if this was government funded.”
However, LGC understands councils which are part of the national pay process risk legal challenge if they refuse to implement an agreed pay offer.
Halton MBC said an additional cost of £0.8m would have to be met through its £1m contingency fund, and not reserves, set for 2018-19 “leaving very little to meet any other unforeseen pressures throughout the year”.
Shropshire Council said the pay increase would cost £0.7m in the first year. A spokesperson added: “This would increase the funding gap, meaning the council will require additional resources, or cuts elsewhere, to pay for it.”
Norfolk CC and Tower Hamlets LBC, which both said a 2% pay increase had been factored into their budgets, each estimate £3m extra costs.
Of the 28 councils reporting they have budgeted for the pay increase, seven provided costings totalling £12.4m in the first year.
Telford & Wrekin Council said the extra £1.5m it had allocated for the wage bill over the next two years would “ultimately have to be covered by finding more savings or additional income”.
Members of National Employers were split along party lines over the size of the pay offer. Conservative members pushed for a 1% increase, warning of potential cuts to jobs and services if a higher pay award was granted, while Labour members backed a 2% rise. The lack of agreement resulted in the body’s chair, Luton BC deputy leader Sian Timoney (Lab), providing the casting vote.
More than 90 Labour council leaders subsequently wrote to chancellor Philip Hammond demanding he fully funds the proposed pay rise.
The Local Government Associaton has said the 2% offer and new pay spine will result in an increase to the national pay bill of 5.6% over two years.
Chief executive of the Chartered Institute of Public Finance & Accountancy Rob Whiteman said the chancellor’s Budget announcement that money will be set aside to fund a pay rise for one million NHS staff “set a bar” for what happens in the rest of the public sector. Local government had to make a “reasonable” pay offer to recruit and retain staff.
He added: “However, [local government] is getting no funding to assist with this whatsoever. Where councils will have some space to increase their council tax levels, they are dealing with pressures in social care and children’s services and so what we see is budget pressures building up with no help from government to solve them.”