The Overall Impact on Public Finances of Meeting the Local Government Trade Unions' 2014-15 Pay Claim
The Impact of Welfare Reform on Low Paid Local Government Workers
Since 2010 pay in local government has increased by less than inflation. Uniquely in the public sector, local government workers suffered a three-year pay freeze - in 2010, 2011 and 2012. The pay award in 2013 was 1%, plus the removal of the bottom pay point in October 2013 – a below-inflation increase. In addition, those earning less than the Chancellor’s ‘low pay’ threshold of £21,000 were not awarded the government’s promised £250 in 2011 and 2012.
On top of this, a number of benefits that can be claimed by low paid workers have been changed. This report assesses how many low paid local government workers have been affected by these welfare reforms. It also explores how these changes - combined with the below inflation pay increases - have combined to make local government workers worse off in 2013 compared to 2010. In doing so, it also takes of all other relevant changes within both the benefit system (such as the uprating of thresholds) and the tax system (notably the £2,965 increase between 2010-11 and 2013-14 in the income tax personal allowance). Taken in isolation, these other changes tend to push up the household income of low paid workers, although they do not always apply to all.
The report focuses on the following reforms:
- The Bedroom Tax (Under-occupancy penalty)
- Restrictions on Local Housing Allowance (LHA)
- The introduction of Council Tax Support
- The reduction in the proportion of childcare costs eligible to be paid through tax credits
- The introduction of the 24 hour rule for working tax credit entitlement.
We define low pay as less than the living wage of £7.45 in 2012. The most recent year of data is for 2010-11 when 315,000 were paid below the equivalent of the living wage in 2010/11. Although there was a London living wage in 2010/11, there was no national one. We have therefore estimated what it would have been by deflating the 2012 £7.45 figure to reflect the changes in prices over the intervening two years.
About this report
This report was written by Adam Tinson, Hannah Aldridge, and Peter Kenway of the New Policy Institute and commissioned by UNISON. The facts presented and views expressed in this report are those of the authors and not necessarily those of UNISON.