Living wage week: councils should lead the campaign

The biggest beneficiary of the living wage is not people or places, it’s HM Treasury

Low pay is the fastest-growing reason people in the UK are poor: an estimated 5 million people are not paid a wage that enables them to live a decent quality of life.

Low pay means that the fast-growing area of poverty is among people in employment. But challenging low pay is not as simple as just increasing hourly rates of pay. Now is the time to go beyond cajoling: paying a living wage must become a key part of local authority leadership and should be universally considered by business as a positive thing to do.

This week, 2–8 November, is Living Wage Week. Campaigners, lobbyists and those who already pay their staff the living wage will promote their work. This is an opportunity for local government to take a leading role, and to develop collaborative relationships across public, commercial and social sectors to promote economic and social good.

Over the past few years, an increasing number of local authorities have recognised the importance of the living wage; 31 councils and the Greater London Authority, have now been accredited as part of the Living Wage Foundation’scampaign.

In Islington, more than 90% of suppliers, not including social care providers, now pay their workers a living wage. In Preston, more than 50 local partners and businesses are accredited living wage employers. And in Manchester, the council has set up a group to help it become the norm for council suppliers to pay the living wage.

The living wage should be embedded into the way councils commission and procure goods and services. Councils can link procurement to strategic priorities to address low pay. They can have contracts that state potential suppliers must pay the living wage and they can use the Social Value Act, as well as charters for social responsibility, to encourage and cajole suppliers.

We know that when people are paid the living wage, workforces are happier, businesses are more productive and local economies benefit, because people have more disposable income.

But the biggest beneficiary of the living wage is not people or places; it is HM Treasury. Our research has estimated that in Preston, if the living wage were to be universally adopted, that would raise £20m for the Treasury from increased tax revenue and the cut in benefit payments to those in employment.

That is a benefit to the public purse – but it’s one that must be reinvested back into local communities. That way, these funds can be used to pay for local regeneration and for more work to encourage and subsidise other organisations, in all sectors, to pay their workers a living wage.

It’s clear that low pay and fiscal decentralisation are intrinsically linked. The debate around devolution sparked by the referendum in Scotland, has highlighted the need to address the rampant centralism that drives the UK’s political economy. Key to this decentralisation is fiscal redistribution and reinvesting taxes.

There are existing devolution policies in the shape of City Deals, which give England’s major cities new powers and freedoms to decide how public money is spent locally to nurture economic growth. But we must get beyond an obsession that cities are the only drivers of economic development. Instead, the next wave of devolution must recognise the ability of different local areas to create economic and social growth in their own ways.

This is the moment for local government to really challenge the central state and to make clear what they are doing and can do to contribute to economic and social growth.

The original article can be read on the Guardian website here.