The number of local government workers receiving Working Tax Credits (WTC) is equivalent to the retail sector and second only to the hospitality industry, is the shock finding of a new report from the New Policy Institute.
Pay rates in local government have plummeted so drastically that the proportion of local government workers receiving WTC (11.2%) is around two and a half times higher than the rest of the public sector. Between 2011-12 and 2012-13 local government workers received around £380m in WTC.
The research highlights just how poorly paid the local government workforce is, and suggests that some of the cost of low pay in the sector is merely being displaced to WTC expenditure, a benefit paid directly by HMRC to workers with a low family income.
The report also warns that, given that WTC requires a certain number of hours to be worked, receipt of this tax credit may understate the problem of low pay in the predominantly part-time local government workforce.
UNISON Head of Local Government Heather Wakefield said:
"This is a damning report that reveals just how far pay in local government has regressed. Successive years of pay freezes and paltry rises well below the level of inflation are creating an increasingly impoverished and demotivated workforce, with taxpayers forced to fund tax credits.
"Working Tax Credits is just one of the ways in which social security picks up the tab for low pay in the local government workforce. Paying tax credits and other in-work benefits to local government workers on the lowest rates of pay is a completely false economy. A substantial increase to local government pay would recoup millions for the Treasury in lower spending on benefits, and see more money pumped back into local economies.
"On one hand we have sectors with widespread low pay such as retail and hospitality that are under pressure to reform, but on the other hand is local government which is subject to direct political control and should set an example. However rather than turning local government into a good example, the Chancellor spelled out more misery last week in his Autumn Statement which promised further pay freezes for council employees under a future Tory government."
The local government workforce accounts for half of public sector WTC expenditure, despite it making up only a quarter of the public sector workforce. The report points out that the local government workforce has a much higher WTC recipiency rate partly because of lower prevailing pay rates in this sector, which tends to be lower than the overall public sector and the same as the private sector, except at the top where it is lower than the private sector.