Workers in Tower Hamlets have been promised more “money in their pockets” by Mayor Lutfur Rahman after the borough became the first to extend the London Living Wage.
The council says “thousands” would benefit from the move.
The policy was adopted on Wednesday evening by the cabinet and means that employees on outsourced and contracted council jobs will earn a minimum of £8.30 per hour which is more than a third higher than the national minimum wage.
The London Living Wage rate, set by the Mayor of London in recognition of the high cost-of-living of the capital, is aspirational rather than binding. Councils and businesses in the city are encouraged to sign up to it.
Mayor Rahman told the meeting of councillors at Town Hall that he was “delighted that no-one working for the council will be on poverty pay.”
The council estimate that thousands of employees working in catering, cleaning, leisure management and social care will benefit from the new rate. However no specific number of those eligible was provided.
There had been concerns that procurement legislation, which precludes the consideration of non-commercial factors in the contractual process, could prove an obstacle to implementation of the policy.
But Peter Naylor, Director of Resources said the issues were ironed out following legal advice. He told councillors that increased pay for employees could legitimately be considered a factor leading to better performance of contracts.
It therefore did not fall foul of the Local Government Act, under which local authorities must obtain the best value for money.
However Mayor Rahman added the caveat that due to tendering rules, it would not be a “blanket policy” and would have to be negotiated on a case-by-case basis with contractors.
He added there would be a presumption in favour of their paying the higher rate though.
The new policy will be a boon for many in the area at a time of tightened belts and soaring living costs. As reported by EastLondonLines last month, female part-time workers have seen their average earnings plummet by almost a fifth in the last year.
With Tower Hamlets rated as the third most deprived local authority in England, the initiative forms part of the Mayor’s drive to improve the quality of life for everyone who works and lives in the borough.
Yet questions remain over where the money will come from, with the policy document admitting “it is difficult to accurately estimate the increased costs arising.”
Last week the Docklands and East London Advertiser reported the policy could cost the borough an additional £45m at a time when the borough is forcing through public service cuts to the tune of £72m over three years.
In response, a spokesperson told EastLondonLines said the council did not envisage any financial implications. They said the council currently has £46.5m worth of contracts already with the LWW in place, but this figure related to the whole value of contracts, not just the sum total of wages. The total value of contracts included in the LLW could rise to £76.8m, they added.
Labour group leader Councillor Joshua Peck welcomed the policy: “The introduction of the London Living Wage in the borough was a Labour policy that made a real difference to our employees and I am glad that that the Independent Mayor has extended it.
“A decent wage for a day’s work is the right thing to do. Tower Hamlets has been a leader and we hope that other councils and businesses will follow suit.”
Speaking to EastLondonLines after the meeting, Mayor Rahman said: “We were the first council to introduce it [in 2008] for all our employees. We have gone beyond that and want to make sure every single contract is covered.
“This is the top priority of my administration. It is about addressing inequality, increasing pay in the pockets of our residents and giving opportunities in these difficult economic times.”
As the condition cannot be imposed retrospectively, the council will begin implementing the policy with the tendering of new contracts and services.