Headlines: November 20th, 2006



Local authorities want permission to capitalise their assets to meet the costs of implementing equal pay. The recommendation has been made by the Local Government Employers in a report looking at the problems councils are facing in meeting the massive costs of ensuring pay for women staff is brought into line with that for men.

The Employers are also urging the Government to consider changes to the law to ensure councils and unions can reach agreements on equal pay through arbitration. Authorities have until March to achieve the full implementation of their equal pay reviews. The Employers’ report, ‘Unblocking the route to equal pay settlements in local government’, calls on the Government to look again at the capitalisation limit, currently around 200 million pounds, so councils can ensure the cost of equal pay is met without putting services at risk.

Under present arrangements, local authorities that cannot use revenue funding, through balances or in some other way, may be able to capitalise expenditure and so use prudential borrowing or capital receipts, However, this can only be done with the approval of the Department of Communities and Local Government and such a step has to fall within the capitalisation limits set by the Treasury. The report makes it clear that as well as a need to find ways in which councils can fund equal pay, they have to be confident they can reach agreements with the unions without the risk that settlements will be overturned by mass equal pay claims at employment tribunals. One suggestion for achieving this is a system of third party arbitration.

Jan Parkinson, Managing Director of the Local Government Employers, said councils wanted equal pay and they were working hard to achieve it. The cap on bids to capitalise expenditure would affect the ability of some authorities to fund back pay costs. “While relaxing capitalisation rules for local authorities may have implications for the Chancellor’s ‘golden rule’, councils have a commitment to deliver an ever better deal for the taxpayer. The largely unexpected scale of this problem means it is simply unrealistic to avoid providing local authorities with appropriate tools to manage this issue and ensure women feel the benefit of equal pay,” Jan Parkinson said, adding that the report was not a begging bowl held out to Government but a request to allow councils to use their own resources.

The report shows councils in the West Midlands are facing a bill to implement equal pay of 928 million pounds, while in the North West the figure is 740 million pounds and in the Yorkshire and Humber region it stands at 371 million pounds.