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LGC/S3/09/R12

12th Report, 2009 (Session 3)

Equal Pay in Local Government

CONTENTS

Remit and membership

Report

INTRODUCTION
BACKGROUND

Single Status
Equal pay
Legal rulings and changes to the law

CURRENT LIABILITIES

Introduction
Categories of equal pay claims
Level of compensation payments
Assessment of risk
Recent judgements
Conclusions and recommendations

EQUALITY-PROOFING SINGLE STATUS

Implementation of Single Status
Ongoing equality reviews
Existing duties
Conclusions and recommendations

COST
FUNDING

Reserves
Capitalisation
Phased payments

OVERALL CONCLUSIONS

ANNEXE A: EXTRACTS FROM THE MINUTES OF THE LOCAL GOVERNMENT AND COMMUNITIES COMMITTEE

ANNEXE B: oral evidence and associated written evidence

Please note that all oral evidence and all written evidence is published electronically only, and can be accessed via the Local Government and Communities Committee’s webpages at:

http://www.scottish.parliament.uk/s3/committees/lgc/inquiries/EqualPay/index.htm

11 March 2009 (7th Meeting, 2009 (Session 3))

Written Evidence

Action 4 Equality Scotland
UNISON

Oral Evidence

Mark Irvine, Action 4 Equality Scotland;
Glyn Hawker, Scottish Organiser, Bargaining and Equal Pay, UNISON;
Alex McLuckie, Senior Organiser, GMB Scotland.

Supplementary Written Evidence

UNISON

18 March 2009 (8th Meeting, 2009 (Session 3))

Oral Evidence

Philip Barr, Head of Human Resources, City of Edinburgh Council;
Norrie Williamson, Director of Finance, East Renfrewshire Council;
Peter Dawson, Corporate Human Resources Manager, East Renfrewshire Council;
John O'Hagan, Executive Director of Corporate Services, North Lanarkshire Council;
Graham Johnston, Head of Finance, Shetland Islands Council.

22 April 2009 (11th Meeting, 2009 (Session 3))

Written Evidence

COSLA

Oral Evidence

Joe di Paola, Head of the Employers Organisation, COSLA;
Councillor Michael Cook, Spokesperson for Strategic Human Resources Management, COSLA.

29 April 2009 (12th Meeting, 2009 (Session 3))

Oral Evidence

John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, Scottish Government;
Graham Owenson, Head of Local Government Finance Team, Scottish Government;
Kirstie Campbell, Local Governance Team Leader, Scottish Government.

Supplementary Written Evidence

Scottish Government

ANNEXE C: OTHER written evidence

East Ayrshire Council
South Lanarkshire Council
Employment Tribunals Scotland

Remit and membership

Remit:

To consider and report on (a) the financing and delivery of local government and local services and planning; and (b) housing, regeneration, anti-poverty measures and other matters falling within the responsibility of the Minister for Housing and Communities.

Membership:

Alasdair Allan (Deputy Convener)
Bob Doris
Patricia Ferguson
David McLetchie
Duncan McNeil (Convener)
Mary Mulligan
Jim Tolson
John Wilson

Committee Clerking Team:

Clerk to the Committee
Susan Duffy

Senior Assistant Clerk
David McLaren

Assistant Clerk
Ian Cowan

Committee Assistant
Fiona Sinclair

Equal Pay in Local Government

The Committee reports to the Parliament as follows—

Introduction

1. The Equal Pay Act 1970 established the requirement for men and women to be paid equally for undertaking the same or similar work. While some progress had been made in local government to tackle pay inequality (for example, an agreement in 1987 to evaluate the jobs of manual workers), there remained a problem of unequal pay. Therefore, in 1999, an agreement was made between local authorities and trade unions called “Single Status”. This agreement sought to harmonise the terms and conditions of manual workers and Administrative, Professional, Technical and Clerical (APT&C) workers in local government. This involved examination of various issues such as pay, grading, working hours, annual leave, sick leave and negotiating mechanisms. Given the requirements of the Equal Pay Act, it was recognised that the central driver of the process was the need to have harmonised, non-discriminatory pay scales. Therefore, the issue of Single Status and equal pay have always been inextricably linked.

2. There were significant delays in implementing the agreement and the issue has already been subject to scrutiny by the Parliament’s committees, given the potentially significant financial liabilities arising for local authorities. In 2006, the Finance Committee undertook an inquiry into the issue and produced a report.1 At that time, a significant number of local authorities had not implemented Single Status. Subsequently, the Equal Opportunities Committee looked at the issue to determine whether or not Single Status was resulting in pay parity, through a series of evidence sessions.

3. This Committee also looked at the issue, most recently during its scrutiny of the Scottish Government’s Draft Budget 2009-10 in the context of the various financial pressures faced by local authorities. Following on from this, the Committee agreed to undertake a further inquiry as it remained very concerned that the costs arising from outstanding equal pay claims continued to be uncertain and represented a potentially significant liability for local authorities.

4. On that basis, the Committee wrote to all 32 local authorities asking specific questions to ascertain their current position with regard to the financial implications of equal pay. The Committee also sought written evidence from the Tribunals Service, seeking confirmation of the number of claims that have been lodged and asking questions about case management and the impact of these cases on the workload of the Tribunals Service.

5. In addition, the Committee held four evidence sessions. On 11 March 2009, it took evidence from Mark Irvine, Action 4 Equality and then from Glyn Hawker from Unison and Alex McLuckie from the GMB. On 18 March 2009, the Committee then took evidence from representatives of a selection of individual local authorities – Philip Barr from the City of Edinburgh Council, John O’Hagan from North Lanarkshire Council, Norie Williamson and Peter Dawson from East Renfrewshire Council and Graham Johnston from Shetland Islands Council.

6. At its meeting on 25 March 2009, the Committee decided, on the basis of the evidence it had taken, to schedule a further two sessions. Therefore, the Committee took evidence from Councillor Michael Cook and Joe di Paola from COSLA on 22 April 2009 and finally from John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth on 29 April 2009.

7. All written and oral evidence received is attached as Annexes B and C.

8. The Committee noted that the Finance Committee had undertaken its inquiry at a time when very few local authorities had implemented Single Status and that it had thoroughly examined the historical issues regarding its implementation and the delays in implementation that had taken place. This inquiry therefore, did not seek to cover the same ground but sought to assess the current situation, particularly with regard to the number of equal pay claims that have been lodged and look at any potential solutions.

9. However, some of the background is laid out in the report to give a context to the current situation.

background

Single Status

10. Historically, manual workers and non-manual workers in local government had separate terms and conditions (this was also true of central government). In 1987, a scheme was introduced to evaluate all manual jobs and grade them accordingly. However, while the scheme assessed job weight and jobs were placed on pay scales according to that assessment, the issue of some jobs attracting a bonus while others did not was not addressed.

11. Although this evaluation scheme had been carried out for manual workers, their terms and conditions were still separate to those of Administrative, Professional, Technical and Clerical (APT & C) or non-manual workers. Therefore, in 1999, a national agreement, called Single Status, was reached in Scotland between COSLA and the trade unions which sought to harmonise terms and conditions for manual and non-manual workers. One of the main drivers of this and of the 1987 agreement was to institute non-discriminatory pay and conditions.

12. New harmonised pay and grading arrangements had to be underpinned by a job evaluation scheme and the intention was to put in place a national scheme which would be recommended, but would not be mandatory, for individual local authorities to use. While the national agreement covered core terms and conditions such as rates of pay and hours of work, Single Status was to be negotiated and implemented separately by each individual local authority.

13. Inevitably when jobs are evaluated, some remain at the same level while others may move up or down. The national agreement stated that where a job moved down (known as “red-circling”), there should be an element of pay protection. The agreement recommended that the individual’s pay should ‘mark time’ (ie, stay at exactly the same level with no inflationary or incremental increase) for a period of three years. Pay can also be protected where any element of total earnings is being removed (such as bonuses).

14. The original agreement signed in 1999 specified that implementation of Single Status should take place by April 2002. However, this date was not met and was extended, by agreement between local authorities and unions, to April 2004. At the time of the Finance Committee’s inquiry in 2006, only a small number of local authorities had implemented Single Status. According to COSLA, the current position is that 26 out of 32 councils have implemented Single Status and the remaining six are expected to do so within the next year.2

15. The Finance Committee’s report focussed on the reasons given for the delays in implementation and it is not intended to repeat these in this report. However, these delays have led to unequal pay continuing in areas of local government and have contributed to a number of the cases that are currently lodged with Employment Tribunals.

Equal pay

16. The issue of Single Status and equal pay is inextricably linked given that Single Status was designed to eradicate discrimination and implementation could provide a possible defence against equal pay claims. Some local authorities made offers of compensation payments for historic discrimination before Single Status was implemented (usually by way of a compromise agreement under which individuals waive their right to take an equal pay claim in return for the payment).

17. Many of these offers were made where manual jobs had already been rated as equal under the 1987 agreement but where bonuses were still being paid and could not be objectively justified. However, some of these offers were not accepted and in those cases, individuals may have taken a claim to employment tribunal seeking a higher level of compensation. Moreover, even when compromise agreements were signed, the time period covered by some agreements ran out before Single Status was implemented. In addition, many workers are claiming they have been discriminated against and no compensation has been offered.

18. As a result of this, there are currently just over 35,000 equal pay claims which have been lodged with employment tribunals in Scotland.3 It should be noted that this figure does not necessarily represent the number of individuals involved as some individuals may have more than one claim lodged.

Legal rulings and changes to the law

19. In 2003, the time limit on compensation for past inequities and discrimination was extended from 2 years to 5 years in Scotland (and 6 years in England and Wales). In its report in 2006, the Finance Committee asserted that if local authorities had implemented Single Status by the original deadline of 2002, this might have limited costs on equal pay.

20. In addition, there have been a number of recent legal rulings which have had or are likely to have an impact on Single Status and equal pay. There are three rulings in particular that the Committee examined during evidence sessions.

21. The first ruling is Allen & others v GMB. In that case, the Court of Appeal ruled in July 2008 that the GMB union indirectly discriminated against female members in Middlesborough Council while negotiating with their employer. The Court determined that the union had prioritised pay protection for male members over obtaining favourable back pay compensation payments for female members. It has been asserted that this ruling might have had an impact on trade unions desire and ability to enter into collective agreements.

22. The second ruling is Redcar and Cleveland Borough Council v Bainbridge (the ‘Bainbridge’ case), again in July 2008, which concerned the question of whether pay protection arrangements that favoured male employees could be justified. The Court of Appeal ruled in this case, pay protection could not be justified. However, the Court also made it clear that this was not a blanket ruling and that any future tribunal cases should be judged individually with reference to the facts in each case. Having said that, it is recognised that it could be difficult for local authorities to prove their pay protection schemes are not discriminatory and therefore the ruling could have an impact on future liabilities.

23. The third ruling in April 2009 related to the need to name a comparator in equal pay cases. Under the Employment Act 2002, employees have to raise a grievance with their employer before going to an employment tribunal. This ruling dealt with the information that requires to be given as part of a grievance. In equal pay cases, employees will no longer be required to specify a male comparator nor to state under what limb of equal pay legislation a case is being raised and need state no more than a claim is under the Equal Pay Act. This is likely to have relevance for a number of cases currently lodged with employment tribunals and possibly on the number of cases in the future.

CURRENT LIABILITIES

Introduction

24. It is recognised that local authorities not only have an obligation, but a duty to ensure there is equal pay for work of equal value and therefore an obligation and a duty to resolve the current situation. Therefore, the Committee is concerned that the situation remains unresolved with some local authorities not having implemented Single Status and over 35,000 cases having been lodged with employment tribunals. In addition, recent legal rulings bring further issues with which the relevant parties have to deal.

25. Joe di Paola from COSLA stated—

“We have a legal obligation to introduce equal pay. We will continue to do that as quickly as we can, but the negotiations have been the most difficult, protracted and complex that I have ever been involved in. Every time there are judgements such as those in Redcar and Cleveland Council v Bainbridge or Allen v GMB, the process is set back.”4

26. The Committee’s inquiry sought to examine the various issues involved in the current situation, to determine the reasons behind the lodging of so many equal pay claims and to examine potential solutions.

Categories of equal pay claims

27. Under The Equal Pay Act 1970, there are three ways for claimants to show that their work is equal to that of their comparator. These are if they are engaged in “like work”, “work rated as equivalent” or “work of equal value”.

“Like work” claims

28. As its name suggests, to prove a claim of “like work”, the claimant must be doing the same or broadly similar work to someone else.

“Work rated as equivalent” claims

29. To claim “work rated as equivalent”, jobs must have been rated the same under a job evaluation scheme carried out by the employer. The scheme must be free from discrimination and must be analytical.

30. It is likely that many work rated as equivalent claims will have been taken by manual workers as they had already been subject to job evaluation prior to Single Status, through the 1987 agreement. However, jobs rated as equivalent under that scheme were still attracting different earnings mainly through the payment of bonuses.

31. According to Mark Irvine from Action 4 Equality, these claims are the most straightforward. He went on to state that “some councils (Glasgow, Edinburgh, Stirling and Renfrewshire) have settled many of their WRE [work rated as equivalent] claims but that the majority have still to do so, hence the ongoing litigation.”5 However, in referring to such claims, John O’Hagan from North Lanarkshire Council said that “for the most part, councils have either tackled such claims or are in the advance stage of tackling them.”6

32. Generally, these were the types of claims that local authorities sought to settle by way of a compensation payment and a compromise agreement. However, where a compensation payment has been offered, but not accepted then the individual could take their case to employment tribunal claiming that the compensation is insufficient.

33. There may also be work rated as equivalent claims from APT&C staff where Single Status has been implemented and job evaluation has been carried out. John O’Hagan stated—

“having taken part in the job evaluation scheme and shared it with colleagues – in our case, 15,000 employees were affected by it – we are giving what some might feel is evidence of past inequalities. As a result, people who might be due to move up a grade can use the evidence from the job evaluation scheme to claim that they have been underpaid.”7

34. In these situations, APT&C (non-manual workers) have been rated the same as a manual worker and therefore, they might claim they should have been receiving the same earnings (and bonuses) as manual workers.

“Work of Equal Value” claims

35. “Work of equal value” claims are those where jobs have not been subject to job evaluation but it is claimed that those jobs are of equal value. In those cases, a tribunal is likely to ask an independent expert to evaluate the jobs concerned.

36. In addition to there being work rated as equivalent claims from APT&C workers, there may also be work of equal value claims. The majority of equal value claims are likely to arise where Single Status has not been implemented and therefore jobs have not been rated under an evaluation scheme.

37. However, there could potentially be another category of equal value claims where Single Status has been implemented, but individuals claim it has not been implemented properly and that their jobs should have been rated the same as another job. John O’Hagan confirmed this by saying “indeed, claims that are moving forward under red book conditions [single status] are not for work that has been rated as equivalent but for work that is of equal value.”8

38. The issue of the equality-proofing of pay and grading schemes that relates to this latter category of potential claims is dealt with later in this report.

39. Philip Barr from the City of Edinburgh Council described his council’s views on claims by manual workers and by APT&C workers—

“We have been told to compromise with women manual workers – those whose jobs were rated as equivalent – because we cannot win against them in court. The APT and C claims – which involve not manual workers but white-collar workers who were paid monthly – are from women who say that they have similar claims to women manual workers. We have been told that we can and should contest those claims, and our council has said that it will do so because that is in the taxpayers’ interest.”9

40. As has been noted, a number of local authorities offered compensation payments to workers to cover back pay for historic discrimination. Where these offers were accepted by an individual, a compromise agreement would be signed which would normally stipulate that the individual would waive their right to take a case to tribunal. However, it would appear that many of these agreements were for a specific time period and if Single Status had not been implemented when this period had elapsed, then the authority concerned would be liable to pay further compensation.

41. As Joe di Paola from COSLA stated—

“If a council has not implemented an equal-pay-proofed pay and grading system by the end of the compromise period, its liability will continue and a different negotiation that might be at a different level will take place about the women’s claim.”10

42. Again, if a further offer of compensation is not agreed to by an individual, that individual may decide to take a case to employment tribunal.

43. Therefore, it can be seen there are a number of different categories of claim which have been or may be lodged with employment tribunals.

Level of compensation payments

44. As noted above, some of the claims may be from individuals who did not accept the employer’s proposed compensation settlement and therefore, in those circumstances, the discrimination has effectively been recognised and the case concerns the amount of compensation.

45. On the level of compensation payments that were offered, Glyn Hawker from Unison stated—

“for the most part, the trade unions recommended to their members not to accept the offers because they were not at the level that we expected to achieve.”11

46. Alex McLuckie from the GMB pointed out the differences between the levels offered, saying that—

“The range of offers, rather than settlements, was from about 48 per cent to about 95 per cent of what could reasonably be expected to be won at tribunal. That is quite a difference.”12

47. In 2005, COSLA proposed a framework agreement for compensation payments which would have included a payment matrix. Having such an agreement would have obviated the need for there to be negotiations with individual local authorities. However, the framework and matrix were never agreed and according to Glyn Hawker, “the proposal was rejected because the levels that were on offer were nothing like acceptable to the trade unions, which had consulted their members on it. That is why we moved to negotiations with individual councils.”13

Assessment of risk

48. Individual local authorities and councils were asked whether they should settle cases that are considered to be strong. Peter Dawson from East Renfrewshire Council acknowledged that while his authority saw no validity in a number of claims that have been made against them, there were a number of “very strong claims.”14 When questioned further about this, he went on to say that—

“We have made increased offers to claimants, but we have not yet reached an agreement with their lawyers. We place a value on the claims and the lawyers place another value on them. We must reach a prudent settlement and we are engaged with the lawyers on that.”15

49. On the same issue, Philip Barr from the City of Edinburgh Council stated—

“It is a no-brainer for most councils: we cannot win these cases in court…We in the City of Edinburgh Council know that those women are entitled to settlements, so we are settling with them.”16

50. When asked about this issue, Councillor Michael Cook, representing COSLA stated—

“We expect that all councils will carry out risk assessments of all the cases that they face and make judgements about the relative merits of those cases. Obviously, if a case is strong and persuasive, there is likely to be a dynamic that would encourage that council to consider settlement of that case.”17

51. He went on to say that—

“I cannot say exactly what those judgements will be, but it seems to me only common sense that if the cases are persuasive and have strong merit the local authorities will be under pressure to look at settling them.”18

52. The Cabinet Secretary for Finance and Sustainable Growth was also asked whether, during discussions he had with COSLA, there was an opportunity to persuade local authorities to deal quickly with what are perceived to be strong cases. Like COSLA, the Cabinet Secretary stated that judgements had to be made over individual cases and that he “would certainly want authorities to resolve matters as quickly and efficiently as possible”19

53. The Committee agrees that it would not be a good use of public money for local authorities to settle cases they believe have no validity. However, it also believes that it serves no-one well (least of all the claimants) for strong cases not to be settled. This is particularly true of cases where the main issue is not over whether discrimination has occurred, but is over the level of compensation.

Recent judgements

54. Given the length of time it has taken to implement Single Status, it is unsurprising that a number of legal rulings and case law have developed which have impacted on, or could impact on, the number and complexity of equal pay claims. The extension of the time limit on compensation for past inequalities from 2 years to 5 years is one such example.

Bainbridge

55. There is also a possibility that there could be further equal pay cases as a result of the previously mentioned Bainbridge case. As stated, the Court of Appeal did not rule that every pay protection scheme would be seen as discriminatory, but it was clear that it would be difficult for local authorities to prove that such schemes are not discriminatory.

56. While all witnesses acknowledged that there may be further liabilities arising from Bainbridge, local authorities in particular suggested that the situation would not be the same for every council. Philip Barr from the City of Edinburgh Council stated that—

“Protecting the men means that we have to pay for litigation by, or make compromise agreements with the females and we have provided for that.”20

57. He went on to say that in Edinburgh’s case, it was bonus payments which were the subject of pay protection and that—

“the males are receiving bonus, which is discriminatory, therefore the females have a case – that is what our counsel said. Other councils might not be protecting bonus, and other types of protection might not be discriminatory, as our approach to protecting male bonus would be.”21

58. However, John O’Hagan from North Lanarkshire Council suggested that there could be various ways in which tribunals could interpret the Bainbridge judgement in future cases and stated that—

“I do not think that the received wisdom should be that Bainbridge necessarily creates a universal set of new liabilities. The position will be different for each council.”22

59. Peter Dawson from East Renfrewshire Council confirmed that no provision had been made in relation to Bainbridge and Graham Johnston from Shetland Islands Council stated that the council believed that the offer it had made would address the problem and would not generate Bainbridge–style claims.23

60. The Committee is concerned that, just as there have been different problems faced by different councils as a result of there being 32 individual negotiations over Single Status, there will be different councils affected in different ways as a result of Bainbridge. In evidence to the Equal Opportunities Committee, Joe di Paola said that—

“We have said to our councils that they must, as a matter of urgency, attempt to calculate what the costs of that protection might be because, as Michael Cook says, the local authorities in the north-east of England were found wanting in that they had not calculated what the costs would be of protecting the women’s salaries at the same level as the men’s.”24

61. When asked whether COSLA had issued advice to local authorities, John O’Hagan responded that “advice has not yet been published, but I think it is being prepared.”25

Ruling on comparators

62. Another judgement that could have an impact on equal pay claims is the ruling by Mr Justice Elias in three conjoined cases which overturned an interpretation by Lady Smith in Scotland. In summary, the ruling is that employees will no longer be required to specify a male comparator when taking a grievance against their employer and will only be required to state they are taking a claim under the Equal Pay Act, rather than stipulating under what limb of equal pay legislation a case is being taken.

63. Reports of the case suggested that around 7,000 claims across the UK were awaiting the outcome of this case. It has been argued that this ruling removes any opportunity to contest a case on technicalities (such as whether a tribunal case is using a different comparator to the one used in a grievance submitted to the employer.) If that is the case, then it could be possible for cases to move more quickly through the system. However, Joe di Paola also warned of the potential for further equal pay claims to be lodged, saying—

“Someone bringing a case against a council can now say, “A range of male employees are paid more than me, but my job has been evaluated as equivalent.” The judgement frees up individual claimants. It makes it easier for them to bring valid equal pay claims…the judgement means that authorities could face more cases.”26

Future rulings

64. There are also a number of cases currently before the Tribunal and before the Employment Appeal Tribunal and Court of Appeal which could impact on the current situation. John O’Hagan from North Lanarkshire Council stated—

“We are at a stage in the process at which several issues are being flushed out and clarified through the courts. I suspect that the tribunal hearings that are going on and those which are scheduled for the coming months will result in decisions that apply the law as it is understood and which are based on evidence and conclusion on factual outcomes. We will all consider those decisions and reach a view on whether, although we have settled claims – my council has settled more than 3,000 – after a further consideration of the risk analysis, we should offer compromise deals on another raft of claims.”27

65. The Committee is concerned that there appears to be no end in sight and that as soon as one set of problems is resolved, another set arises. As Joe di Paola said to the Equal Opportunities Committee—

“We think we are moving along nicely and getting stuff implemented, but then there is a judgement…those judgements will continue to happen because the matter is highly litigious; it is an area of industrial relations that has been bedevilled by the law in a way that we have never seen before.”28

66. Ultimately this means that low-paid female workers are potentially losing out and it could also mean that the financial liability faced by local authorities could become even more significant. The Committee is of the view that if Single Status had been implemented earlier, that a number of these legal issues would not have arisen. However, as Philip Barr from the City of Edinburgh Council said – “we are where we are”29 and therefore, the Committee has concentrated on assessing whether there are any solutions to the current situation.

Conclusions and recommendations

67. The Committee appreciates that this an extremely litigious situation. It also appreciates that while it might be helpful to have a moratorium on new equal pay cases, this is not possible to achieve in practice because claims need to be made before they are time-barred. Therefore, the Committee believes that, as stated previously, efforts should be made to determine what the strong cases are and to settle them to reduce the number of equal pay cases at employment tribunal.

68. There does appear to be some appetite among the parties to make progress through agreement. Councillor Michael Cook said that “we need to make progress” and that “collectively, people need to agree that progress will be made. That is what it is about.”30

69. Mark Irvine from Action 4 Equality stated—

“Common sense would determine that a solution should then be negotiated rather than adjudicated, but we are willing to resolve matters through negotiation, and I am sure that the trade unions are too.”31

70. However, he went on to say that although he was not against collective bargaining, it had not delivered the intended outcome.

71. Glyn Hawker from Unison went further and stated—

“At some point, there needs to be a mechanism for getting together and saying “Okay, we may agree or disagree on some of the detail, but the Bainbridge decision gives us clarity about one particularly liability.” It should not be beyond the bounds of possibility to say that we have a common problem. We can spend a lot of time blaming each other or other people and saying that, if we had done things differently in the past, the problems might not have happened, but we are where are. Unison’s point is that we need to acknowledge where we are, identify the various strands of problems and the many tools that we have, and bring together our experience and expertise to say, “Right, what do we need to do?”32

72. The Committee is firmly of the view that all of the parties concerned (councils, trade unions, COSLA and lawyers) should be brought together, to enter into discussions over the potential settling of strong cases that are currently within the system.

73. Given that in settling cases, individuals give up their individual right to take a case to tribunal, the Committee does appreciate that such all-party discussions cannot lead to binding agreements, because individuals must agree to an offer on an individual basis. However, if the discussions are productive and constructive and produce the prospect of realistic settlement figures, it may be possible that trade unions and lawyers would feel able to recommend an offer to their members and clients.

74. COSLA was asked whether it could act as an “honest broker” in any such discussions. The witnesses did not feel this would be possible given that they are the representative organisation for local authorities – one of the participants in any such discussions.

75. The Committee therefore asked the Cabinet Secretary for Finance and Sustainable Growth whether the Scottish Government might have a role to play. The Cabinet Secretary made clear that he sees these as matters which should be addressed by local authorities (as did the previous Scottish Executive) and stated that—

“In the circumstances, it would be wrong for the Scottish Government to seek to step in and impose new arrangements where arrangements have not already been implemented.”33

76. The Committee would certainly not seek to suggest that the Scottish Government should impose a settlement on local authorities. It also recognises that local authorities, as the employer, have a duty to resolve these issues. However, it does believe that the Scottish Government should seek to be involved when their involvement is likely to add value (for example, on the issue of capitalisation which is discussed later in the report).

77. The Committee notes that in its 2006 report, the Finance Committee recommended that local authorities, unions and COSLA should enter into urgent discussions, facilitated by the then Scottish Executive to ensure implementation of Single Status across all authorities within 12 months and to consider the lessons to be learned from the failure to progress agreement on Single Status.

78. The Executive responded that while it believed this was a matter for local government to resolve, it would consider any representations made by individual local authorities and it would facilitate discussions between all interested parties, whenever possible. It is clear that despite this recommendation and response, Single Status was not implemented universally and indeed, since 2006 the number of equal pay claims has increased considerably.

79. While it is not clear whether any such discussions took place, the Committee echoes the call from the Finance Committee in 2006, this time in relation to equal pay claims and recommends that all the relevant parties should be brought together to come to an agreement on how to deal with those cases in the system which are considered to be strong and that these discussions should be facilitated by the Scottish Government.

80. In addition, if they have not already done so, the Committee recommends that COSLA should publish comprehensive guidance and advice to local authorities on the potential implications of Bainbridge and it further recommends that this should be undertaken in consultation with the trade unions. While the Committee recognises that the impact may be different in different authorities (for example over the question of what part of pay is being protected), it believes that having overarching guidance would avoid the possibility of inconsistent approaches being taken with the resultant problems that could cause.

81. While it is possible that some claims related to Bainbridge have already been lodged with Tribunal, if action is not taken now to resolve any pay protection issues, this could result in a further raft of claims being lodged at Tribunal. The Committee therefore also recommends that, in light of the experience of claims for historical discrimination, that any compensation payments are set at a level which more accurately reflects the individual’s loss and therefore at a level whereby individuals would be more inclined to accept the offer and less inclined to take a case to tribunal.

82. The Committee is mindful of the attempt that was made to come to a framework agreement on payment for past discrimination and that had the figures been acceptable to the trade unions, a matrix of payments could have been applied. When discussing the fact that the unions negotiate both with COSLA and with individual local authorities, Glyn Hawker of Unison said—

“If we had come to a framework agreement about compensation, it would have been an agreement with COSLA, which the councils would or would not have signed up to. However, we did not get to that point, hence the 32 separate negotiations.”34

83. The Committee therefore recommends that in addition to publishing advice and guidance that COSLA should consider whether a framework agreement with a suggested payment matrix could be put together with the trade unions to deal with Bainbridge issues.

84. In making all of these recommendations, the Committee is aware of the reluctance on all sides to make agreements, given how litigious the situation has become. As Joe di Paola of COSLA said – “the level of caution is sky-high. Nobody wants to sign anything.”35 However, the Committee does not believe that this should be used as an excuse not to try anything. Furthermore, if a matrix to deal with Bainbridge were to more accurately reflect individual loss (as set out above), then perhaps it is more likely that trade unions would feel able to sign up to such a matrix and framework agreement.

85. The issue of local authorities’ ability to fund such settlements is of course crucial to reaching a settlement and funding issues as they relate to the whole issue of equal pay are dealt with later in this report.

equality-proofing single status

Implementation of Single Status

86. Many equal pay claims have arisen from the non-implementation of Single Status and therefore, the local authorities which, at the time of this report, have not implemented Single Status, leave themselves more exposed to equal pay claims.

87. The Committee therefore considered whether the converse was that local authorities who had implemented Single Status would not be exposed to further claims. In evidence to the Equal Opportunities Committee, Councillor Michael Cook explained that twenty-six local authorities had implemented Single Status and that “In our view, that negates the possibility of further equal pay claims regarding those pay structures because the arrangements are based on job-evaluated schemes.”36

88. The Committee notes that of those twenty-six local authorities, only six reached agreement with the local trade unions with the remaining twenty schemes being imposed. In its written submission, Unison states ”in over 80% of cases Unison recommended that its members reject the employer’s proposals because of concerns over continuing discrimination.”37

89. However, in evidence both to the Equal Opportunities Committee and to this Committee, COSLA suggested that the trade union reluctance was rooted in the Allen v GMB case, where cases were taken against the union by their own members and that “as a result, trade unions are now very cautious about reaching collective agreements on these issues.”38 Additionally, COSLA stated in evidence to the Equal Opportunities Committees that authorities had to judge whether they should impose schemes, given their duty to bring in equality-based pay and grading systems and that “most of our councils have chosen to do so because of that duty.”39

90. The trade unions and Action 4 Equality alleged, in evidence to this Committee, that discrimination had not necessarily been eliminated as a result of implementation of Single Status.

91. Mark Irvine, from Action 4 Equality gave the example of Glasgow City Council where he claims that its pay and grading structure “provides that only full-time workers receive extra points, which means prizes in the form of extra money. Under that scheme a full-time worker receives seven points which translates into about £800. I cannot for the life of me see how that is not discriminatory, given that the vast majority of part-time workers, who do not quality, are women.”40

92. In addition, Unison gave examples of Highland Council and East Ayrshire Council, claiming that—

“Highland Council has recently imposed a new pay and grading scheme on its employees despite receiving an equality impact assessment that shows that the pay gap has been widened. In its submission, East Ayrshire Council refers to the fact that it has a new pay and grading model, but it has not addressed pay and conditions. At the moment, its terms and conditions have different rates of pay for weekend enhancements.”41

93. In evidence to this Committee, Councillor Michael Cook reiterated the point he made to the Equal Opportunities Committee by saying “we do not accept that the schemes have further legal implications.”42

94. On the general issue of the assessment of new pay and grading schemes, Joe di Paola from COSLA stated—

“We have said clearly to all our member councils that, in their discussions with their trade unions, they will not get an agreement unless their pay and grading structures are subject to equality impact assessment.”43

95. In the case of Highland Council, Unison stated that an equality impact assessment had been carried out and therefore, the problem was not that no assessment had been made, but that the assessment had shown the scheme had not closed a gender pay gap. Although not referring specifically to Highland Council, Joe di Paola did say that some authorities had amended their schemes once equality impact assessments had been carried out.44

96. When asked about Glasgow City Council, COSLA responded that they could not comment on the job evaluation scheme used in Glasgow because it was not the nationally recommended Scottish job evaluation scheme. As mentioned earlier in this report, while the overarching agreement on Single Status recommended a model job evaluation scheme, it was not mandatory for authorities to use such a scheme. COSLA confirmed that a further two local authorities had not used the national scheme – City of Edinburgh Council and South Lanarkshire Council. While Glasgow and Edinburgh used what was known as the Greater London provincial council job evaluation scheme, South Lanarkshire used a derivative version of the Scottish scheme. Having a number of different schemes as a result of local rather than national implementation does not appear to have been helpful in this whole process.

97. The Committee is aware that the Equality and Human Rights Commission (EHRC) stated on 26 March 2009 that it would investigate Glasgow’s pay and grading arrangements in relation to Pupil Support Assistants. According to the EHRC, it is “concerned that the job evaluation process adopted by the Council may be discriminatory because it does not appear to measure equally the significant features of both female and male jobs”.45

98. The results of this investigation are likely to be known by the end of 2009. However, as Joe di Paola said, it remains to be seen whether there will be implications for any other council because Glasgow City Council used a different evaluation methodology.

99. There are clearly differing views on whether new terms and conditions resulting from the implementation of Single Status are free from discrimination. The Committee is not able to, nor would it seek to, arbitrate on this issue. However, it recognises that while there remain doubts, there remains the possibility that further equal pay claims will be lodged with further potential liabilities for local authorities.

Ongoing equality reviews

100. The Committee is of the view that having robust, non-discriminatory pay and grading systems is the key to eliminating unequal pay in the future. The Committee notes that is also the view of both employers and unions. Alex McLuckie of the GMB stated—

“Equal pay is about setting the future rate. Believe it or not, that could be more advantageous to female workers than the back money. If someone has 20 or 30 years to work, they will benefit from the higher rate for 20 or 30 years.”46

101. Philip Barr from the City of Edinburgh Council said—

“We must apply correctly and robustly an equality proofed comprehensive pay and reward system. That will be done in every council throughout Scotland.”47

102. The Committee also recognises that it is not only important to equality-proof new pay and grading systems when they are first implemented but it is also necessary to review those systems regularly. In this way, it can be ensured that systems continue to be non-discriminatory.

Existing duties

103. Public bodies have a gender equality duty which means they must have due regard to the need to eliminate unlawful sex discrimination and harassment and to promote equality of opportunity between men and women. As part of this duty, a body must produce a gender equality scheme to say how it intends to fulfil these duties. It must report on progress annually and review and revise the scheme every three years.

104. Additionally in Scotland, public bodies with at least 150 (full-time equivalent) staff must publish an equal pay policy statement and they must report on it every three years. The Equalities and Human Rights Commission has certain enforcement rights with regard to the gender equality duty such as undertaking investigations (which it is about to do in Glasgow City Council).

105. There is no statutory requirement for public bodies to undertake equal pay audits. However, under gender equality schemes, bodies have to consider the need to have objectives to address the causes of any gender pay gap and certain public bodies have to produce equal pay policy statements. Therefore, it is likely that bodies would seek to undertake an equal pay review to fulfil that duty and it would be very difficult for a body to demonstrate that they were doing this, without carrying out an equal pay audit.

106. This shows that local authorities not only have to ensure the schemes they implement now are non-discriminatory, they need continuously to check that pay and conditions remain non-discriminatory.

Conclusions and recommendations

107. According to COSLA, most if not all authorities will have carried out an equality impact assessment on their new pay and grading structures. However, it is not entirely clear whether such assessments were carried out by the local authorities themselves or by a third party. However, the City of Edinburgh Council confirmed that they had used an academic to assess their scheme was equality-proofed. Joe di Paola said that he hoped there could be agreement between local authorities and trade unions as to who should carry out such an assessment and that “there are several Advisory, Conciliation and Arbitration Service-accredited experts in the field.”48

108. In its written submission, Unison suggests that Audit Scotland should play a role in independently assessing equality measures adopted by local authorities, given that the duty of Best Value also encompasses equality. However, in evidence to the Equal Opportunities committees, Lynn Bradley from Audit Scotland stated that “We do not consider whether one scheme is inherently more risky than another.”49 She went on to say that “the approach [of Audit Scotland] is not so much one of risk assessment as one of verifying that the figures in the financial statement are correct and that legitimate payments have been made. That is the extent of our interest.”50

109. The Committees notes that in its consultation on Best Value 2, the Accounts Commission stated “Audit Scotland is working with the Equalities and Human Rights Commission and other interested parties to develop a consistent and coherent approach to addressing equalities within BV2. This approach would be consistent with the more integrated approach to the treatment of equalities issues underpinning current government policy.”51

110. The Committee considers it is imperative that there is independent equality-proofing of new pay and grading arrangements in local authorities. While this in itself will not prevent further equal pay claims from being lodged (as it is an individual’s right to take a claim), it could provide assurance to all those involved and it can also be used as a defence of the system. The Committee agrees with COSLA’s hope that this should be agreed by both the employers and the unions.

111. The Committee notes Joe di Paola’s view on the extent to which COSLA can become involved in negotiations on equal pay—

“The fact that authorities can reach agreement only individually on their pay and grading structures means that we cannot exercise anything other than support and encouragement from the centre. We probably have 29 different models at present but, as long as a council’s scheme is equality-impact assessed, we cannot say that it should not do it that way.”52

112. While the Committee notes these comments, it also recognises that COSLA is a partner in the Scottish Joint Council (the negotiating body for staff terms and conditions). The Committee therefore recommends that, through the mechanism of the Scottish Joint Council, COSLA and its members should, in conjunction with the trade unions, introduce an agreed independent assessment system for new pay and grading arrangements. Having an agreement at this national level would ensure consistency of approach. As part of any agreement, the Committee suggests there should be a clause stating that local authorities will undertake any necessary adjustments to their schemes as recommended by the independent assessment.

113. It would then be possible for Audit Scotland, as part of the Best Value audits, to check and report on whether a local authority’s scheme has been equality-proofed, what recommendations have been made and what work has been undertaken to address those recommendations. The Committee further suggests therefore that this issue be examined in the context of Best Value 2.

114. On the issue of regular reviews, the Committee recommends that local authorities undertake an annual equal pay audit, if they are not already doing so as a result of their equality duty.

115. The Committee notes the Cabinet Secretary’s willingness to engage with COSLA on equality-proofing for the future when he stated that - “We are happy to have discussions with COSLA on that question to ensure that the advice that we have is made available to local government.”53 Although the Cabinet Secretary went on to say that his central point remained that the issue was the responsibility of local government. The Committee also notes that the Equalities and Human Rights Commission can be a source of advice and that it currently publishes guidance on how to undertake equal pay audits.

116. The Committee therefore recommends that the Scottish Government enters into discussions with COSLA over the issue of regular reviews and equality-proofing for the future and that it gives all the necessary advice and support that it can. Such discussions might also usefully include the Equalities and Human Rights Commission.

Cost

117. Fundamental to this inquiry, is the Committee’s concern over the potential cost to local authorities of Single Status and particularly, equal pay settlements. Therefore, the Committee wrote to all 32 local authorities asking what was the current position on a number of issues, namely:

  • Whether an assessment had been made of the likely overall cost implications of equal pay?

  • If so, what the estimate of the total cost is?

  • In terms of equal pay cases which remain to be settled, what estimate of the cost of settling these cases has been made?

  • In terms of tribunal cases relating to equal pay, how many have been settled and how many remain outstanding?

  • In terms of the tribunal cases that remain outstanding what are the likely legal costs associated with these cases?

  • Is there scope for the local authority to use reserves to meet any potential liabilities in relation to equal pay?

  • If there is scope to use reserves, what proportion of the cost of settling equal pay cases is it considered reserves will be able to cover?

  • In terms of assessing the cost of equal pay, are there liabilities for staff which the local authority had previously considered would not be covered by equal pay? If so, has any estimate of the cost of equal pay included the cost for these staff that were not previously considered to be covered by the equal pay provisions.

  • Has a settlement been reached with regard to Single Status? If a settlement has been obtained, was this settlement reached through negotiation or imposed?

  • Where a settlement has been obtained, are there any on-going financial costs associated with implementing the settlement? If so, what are these costs estimated to be?

  • Where a settlement has not been obtained, has an estimate been made of the cost to the local authority of reaching a settlement? If so, what is the cost estimate?

118. COSLA sent a collective response to the Committee on behalf of all local authorities. This is attached as part of Annexe B. The Committee notes that while 30 authorities responded to COSLA, not all authorities responded to all questions.

119. 18 authorities provided an estimate of the likely total cost of equal pay and the total estimate for these 18 authorities was over £340.5m. Additionally, 22 authorities provided an estimate of the cost of outstanding equal pay claims with a total estimate for those authorities of £169m. The letter from COSLA states that comments from local authorities included a concern about giving further estimates which may prejudice the local authorities’ legal position in defending on-going cases.

120. The letter from COSLA makes clear the degree of uncertainty involved in predicting potential costs, particularly in relation to potential legal costs associated with equal pay claims (on that question, only three authorities were able to give an estimate). However, it is disappointing that not all authorities answered all questions and the Committee is surprised, for example, that not all authorities were able to provide information on the number of equal pay cases that have been settled and how many remain outstanding. However, it is grateful to COSLA for collating the response for the Committee.

121. In its Overview of the local authority audits 2008, the Accounts Commission shows equal pay and related legal costs and Single Status implementation as corporate funding pressures. In terms of equal pay and related legal costs, the report shows total equal pay costs of £181m in 2007-08 (compared with £233m in 2006-07 and £280m in 2005-06). The report goes on to say that the Commission estimates that Single Status implementation adds one to eight per cent to the overall pay bill.54

122. In the same report, the Commission goes on to say that—

“Across Scotland there are significant numbers of equal pay claims going through employment tribunals which may have financial implications for councils. A survey [carried out by the Scottish Trades Union Congress] in October 2008 estimated that cases have cost Scottish councils £1.6 million in legal fees alone.

It is vital that councils ensure that pay and reward systems meet legislative requirements under the Equal Pay Act and that any areas of discriminatory practice are addressed. All relevant costs and financial implications should be reflected in budgets.”55

123. Given that the Accounts Commission has confirmed that all cost implications should be reflected in budgets, the Committee is concerned that not all local authorities were able to answer the questions put to them and that, on the question of the Bainbridge judgement, some authorities said they had included estimates for this while others said they had not.

124. COSLA was asked for further clarification on the total costs of equal pay and Single Status in evidence. Councillor Michael Cook stated—

“in evidence to the Parliament’s Finance Committee in 2006, a figure of £560m for retrospective equal pay claims was posited. That figure still has validity.”

125. He went on to clarify that the £560m did not include the financial implications of the Bainbridge judgement. Further, the £560m was a total figure, including cases past and present and therefore, the current figure would be lower as some claims have been settled. COSLA’s letter specified a figure of £169m to cover outstanding claims (based on Employment Tribunals finding against authorities). COSLA confirmed that the following was a fair summary of the backpay implications—

“The figure of £169 million is for 22 councils and excludes Bainbridge, the Highland Council decision and any other decisions that may be in the pipeline. In addition, 10 councils have made no response and have given no estimate thus far.” 56

126. The Committee notes that, as set out above, the Accounts Commission reported a figure of £181m for total equal pay costs across all local authorities.

127. In addition, Councillor Cook confirmed that the Society of Local Authority Chief Executives and Senior Managers (SOLACE) had carried out work on the cost of Single Status and extrapolated a figure equivalent to 4.7% of the Scottish joint council’s paybill, which put the estimate at that time at around £150m to £200m.57 Councillor Cook confirmed that these are ongoing revenue costs as opposed to the one-off costs of equal pay claims.

128. It is clear that the potential costs of the Bainbridge judgement have not been worked out across local authorities. Glyn Hawker from Unison stated –

“from Unisons’ negotiating experience…we are aware that a medium-sized local authority would project at least £30m to meet the costs of Bainbridge. If we scale that up across all of the local authorities in Scotland, we are talking about several hundred million pounds – possibly even £1 billion.”58

129. When the question of the cost of Bainbridge was put to individual local authorities, the City of Edinburgh Council confirmed that between £15m and £20m had been set aside in the next three years to meet the cost of Bainbridge claims.59 Whereas East Renfrewshire Council had made no provision. The differences in approach in part appear to arise because authorities believe there are differences between them with regard to whether they would be liable at all for any Bainbridge claims. John O’Hagan from North Lanarkshire Council said that there were a lot of arguments still to take place around Bainbridge.60

130. While the Committee appreciates there are areas (such as the provision of legal advice) where it may be relatively difficult to quantify costs, it is concerned that there is still so much uncertainty surrounding the total liability to local authorities of equal pay settlements. While the Overview from the Accounts Commission records a figure from the 2007-08 accounts, it is not clear whether this includes all known liabilities.

131. The Committee notes that the Accounts Commission states that all relevant costs and financial implications should be reflected in budgets. It also notes evidence from Lynn Bradley of Audit Scotland to the Equal Opportunities Committee that it would be expected that local authorities would make reference to Bainbridge implications in their annual accounts.61 Although the Committee also notes that Audit Scotland witnesses did not appear to be aware that the Court of Appeal had already ruled on the Bainbridge case.

132. Given the number of variables involved, it is clearly not an easy task to predict, with a great degree of accuracy, the exact cost of all equal pay liabilities. While it is important for local authorities to try and estimate this, particularly to assess whether costs can be met from existing budgets, the figures will still be a prediction.

133. The Committee has made recommendations in relation to the settling of strong cases and to compensation for Bainbridge-style claims as a way to free-up the current logjam of cases. While it is unlikely that a negotiated settlement would be at a lower level than a tribunal settlement, a negotiated settlement could prevent a case being taken through the tribunal system. Therefore, the sooner a negotiated settlement is made, the sooner there will be greater certainty about costs.

Funding

134. The ability of local authorities to fund their equal pay obligations is a question that concerned the Finance Committee in its 2006 report and one that has also concerned this Committee. During its scrutiny of the Scottish Government’s Draft Budget 2009-10, the Committee raised this issue with the Cabinet Secretary for Finance and Sustainable Growth and the resultant report notes that—

“John Swinney told the Committee that the single status obligation had been on Councils for a long time, so this was not a new commitment. The Chief Executive of COSLA had written to the Equal Opportunities Committee on 3 October, saying that councils had chosen not to seek additional funding for this commitment. Local councils hold reserves which might be used to cover some single status or equal pay liabilities. He accepted that there could still be costs arising from individual cases.”62

Reserves

135. Therefore, in its letter to local authorities, the Committee asked questions about how local authorities were going to fund equal pay. In particular, it asked whether there was scope to use reserves. 15 local authorities indicated that there may be scope to use reserves but, according to COSLA’s response, “for a significant number of these this scope was understood to be limited and dependent on unknown liabilities; 5 councils indicated that this was not an option.”63

136. The Committee asked a further question which was “if there is scope to use reserves, what proportion of the cost of settling equal pay will reserves be able to cover?” COSLA’s response states that 2 authorities indicated 0%, 4 indicated 100% and one had already committed 33% to meet this cost.

137. In its Overview of local authority audits 2008 and in follow-up correspondence to the Equal Opportunities Committee,64 Audit Scotland gave a picture of reserves across all local authorities as at 31 March 2008 and confirmed that £33m of reserves has been earmarked for equal pay. General fund reserves across all councils (excluding Orkney and Shetland where oil-related activities affect the position) were £530m (this is an increase of £110 million from 31 March 2007). £340m of this amount is earmarked to meet known commitments (including the £33m earmarked for equal pay).

138. The estimate of £169m for total equal pay costs is based on 22 councils only and does not include the potential costs as a result of the Bainbridge judgement. Therefore, it is clear that only a small proportion of equal pay costs could be paid from reserves. In addition, £33m is a global figure and it may be that some individual councils will not be able to use reserves at all.

Requests to Scottish Government

139. The Committee is aware that there remain concerns over the ability of local authorities to be able to meet their equal pay liabilities from existing budgets. Alex McLuckie from GMB said—

“When the compromise agreements were reached, the money for the settlements was paid out from the reserves that local authorities had at that time. They went to the biscuit tin and used their money to resolve the situation. You would need to ask them about this, but GMB’s take is that councils do not have the money to resolve the situation.”65

140. The Committee raised the issue of affordability with individual local authorities. Philip Barr from the City of Edinburgh Council explained that—

“we planned for new pay and reward structures; we made a provision of 3 per cent, which equated to £10 million in the first year, increasing to about £15 million in year 5. We also accepted and provided for the fact that introducing the system would compromise female manual workers. However, the problem is the unforeseen litigation costs for the APT and C cases – which I should point out, may or may not be won.”66

141. He went on to say—

“We in Edinburgh are saying that the costs could be dangerous and we feel that it is only right to highlight the possible legal risk. However, as I say, we provided for and financed anything that could have been foreseen and that we knew was on the horizon.”67

142. Philip Barr also confirmed that the authority had not calculated with their legal counsel a worst case scenario where every claim that is brought against the authority is won by the claimants.

143. Therefore, COSLA representatives were asked whether local authorities could afford to meet the costs of all their equal pay liabilities from within existing budgets and reserves and whether COSLA had approached the Scottish Government for additional funding. Councillor Michael Cook responded that—

“We accept that local authorities have an obligation to take forward the equal pay and single status agenda. Although we discuss funding pressures in the round with the Government, we accept that these matters are our responsibility and must be dealt with on that basis.”68

144. Following further questioning, Councillor Cook was asked whether COSLA’s position was that it accepted all equal pay claims were covered by the financial settlement reached by way of the Concordat with the Scottish Government and that settling those claims did not represent a new funding pressure. Councillor Cook confirmed that was broadly the position, except for liabilities arising from the Bainbridge judgement which he said “throws up new implications and consequences.”69

145. Councillor Cook went on to say that—

“the position is that equal pay is contained in the settlement and any pressures that develop will be covered in the on-going discussion with central Government.”70

146. The Committee assumes that ‘ongoing pressures’ refers to Bainbridge-style liabilities, given these are being categorised as a new funding pressure. However, the Committee also notes the comments of the City of Edinburgh Council that costings have not been made for a worst-case scenario and notes the fact that only 18 councils were able to provide an estimate for the total cost of equal pay implications, with some citing various difficulties in making an estimate. In addition, it would appear that across all local authorities, there is only £33m of reserves earmarked to deal with equal pay (although the position with reserves will be different in each authority). The Committee therefore wonders about the basis of COSLA’s confidence that liabilities (bar those arising from Bainbridge) can be funded from existing budgets.

147. In evidence, the Cabinet Secretary confirmed that COSLA had not approached the Scottish Government for additional funding for equal pay. However, he went on to say that COSLA has raised the issue of equal pay with the Scottish Government on a number of occasions.

Capitalisation

148. Since 2006, the UK Government has issued directions to allow councils in England and Wales to ‘capitalise’ their assets. Capitalisation directions enable specific new expenditure to be treated as capital expenditure rather than as revenue (ie, it can be funded through borrowing or from capital receipts). In their written submission, Unison noted that no such facility was available in Scotland.

149. The Cabinet Secretary confirmed that a discussion was taking place with COSLA through the Scottish Government’s capital finance working group to put in place a capitalisation scheme specifically to deal with equal pay. The Cabinet Secretary explained—

“The Scottish Government cannot put in place such a scheme wholly at its own hand; the formal consent of Her Majesty’s Treasury would be needed. Under the normal Government accounting rules, borrowing is permitted only to fund capital expenditure. Borrowing to fund revenue expenditure is permitted only in exceptional circumstances…In our discussion with COSLA, we are modelling a possible Scottish scheme on a scheme that already exists in England. The Treasury has already given consent to councils there to undertake limited borrowing to meet equal pay costs. However, the scheme will not be identical to the English scheme because of the differences in the legislation north and south of the border.”71

150. The Cabinet Secretary confirmed that the value of the capitalisation direction limits in England up to and including 2008-09 (i.e. how much money councils have been authorised to borrow to deal with equal pay) is £1.1 billion.72

151. As has been detailed in the previous section of this report, there remains uncertainty over the total cost of equal pay liabilities and the Cabinet Secretary confirmed that the Scottish Government has not attempted to arrive at a total figure because this is “an issue for local authorities to manage within their own resources and their own financial planning.”73 On that basis, the Committee presumes that the scale of a potential capitalisation scheme to allow councils to borrow money against assets to meet equal pay costs is also unknown.

152. The Cabinet Secretary gave the example of Aberdeen City Council where he agreed, with the Treasury’s consent, to capitalise £11.1m to meet the council’s equal pay costs. He stated that his decision was based on “consideration of the council’s financial position and the business case that it presented to me.”74

153. While the Cabinet Secretary confirmed that the capitalisation scheme would be specifically related to equal pay, he was asked whether the scheme would deal with potential additional costs that might arise as a result of the Bainbridge judgement rather than with any other equal pay liabilities.

154. The Cabinet Secretary confirmed that “it primarily concerns new liabilities that might emerge as a consequence of Bainbridge.” He went on to say “obviously, I am making an assumption that, in terms of the resolution of many of the previous issues, local authorities have other devices at their disposal, including the use of reserves. Fundamentally, that is an issue for local authorities to determine in terms of their financial strength.”75

155. Given this confirmation, the Cabinet Secretary was asked whether he considered that liabilities arising from the Bainbridge decision could be categorised as an exceptional funding pressure in the terms of the Concordat between central and local government. The Cabinet Secretary replied that it could be categorised in that way but that would be determined only after a discussion between the Scottish Government and local authorities.76

156. Due to the apparent continuing uncertainty about how different authorities may be affected by the Bainbridge decision, the Cabinet Secretary was asked how applications for capitalisation would be scrutinised. He replied that—

“There would have to be a clearly articulated business case - as there was in the case of Aberdeen – that determined that that was a justifiable way of proceeding. That business case would have to consider the local authority’s overall financial position. Obviously we have a significant amount of information that would inform our judgement about whether the business case in that context would be justified.”77

157. While it was confirmed that discussions over the capitalisation scheme have begun, the Cabinet Secretary was not able to give the Committee a timescale for conclusion of the discussions.

158. It is not clear how long it will take after the conclusion of the discussion to put in place a capitalisation scheme, to invite and scrutinise applications and to seek agreement from the Treasury. As detailed previously, the Committee believes action should be taken now, wherever possible, to identify any discrimination in light of the Bainbridge judgement and to make payments as required. This could prevent further equal pay claims being lodged with tribunals. Therefore, the Committee would be concerned if any delay in establishing a capitalisation scheme prevented any local authority from making an early settlement.

159. The Cabinet Secretary has confirmed that the scheme will deal primarily with Bainbridge issues. However, the Committee would hope that, should any local authority settle Bainbridge issues before the scheme is set up and find that as a result of making those settlements, it did not have sufficient resources to settle other equal pay issues, the scheme would be flexible enough to deal with such a situation.

160. Therefore, while appreciating that business cases will be looked at individually, the Committee is seeking clarification from the Scottish Government that there will be sufficient flexibility within any capitalisation scheme to ensure that local authorities will be able to meet all their liabilities in relation to Single Status and equal pay.

161. The Committee would also ask that the Scottish Government produce a timetable for establishing a capitalisation scheme as soon as possible.

Phased payments

162. Earlier in this report, the Committee has recommended that local authorities seek to settle cases that are considered to be strong and that settlements (whether for work rated as equivalent claims or Bainbridge) are set at a level which is likely to be acceptable to individuals and to their representatives.

163. The Committee appreciates that in some cases, this may present a financial challenge for local authorities. Therefore, the Committee questioned witnesses on whether it would be practical and acceptable to reach agreements where a higher level of settlement was offered but payments were staged.

164. Glyn Hawker from Unison confirmed that the union would not have a problem in discussing this as it had agreed to similar deals in the past. Mark Irvine, from Action 4 Equality indicated that it would be possible, depending on how the arrangement was structured. COSLA said that it would be a matter for discussion and negotiation. When asked whether COSLA had a model that would allow it to help local authorities to find a way of spreading liabilities over several financial years, Councillor Michael Cook referred to the attempts made in 2005 to develop a national matrix for compensation payments.

165. Although Councillor Cook added that “we can do nothing to override the basic proposition that a claimant is entitled to pursue their claim”, he went on to say, in response to being asked if COSLA would be interested in looking again at a matrix if contacted by a local authority—

“We are always more than ready and willing to provide advice to local authorities. We do that as a matter of routine. Approaches on any of these issues certainly bring out a response that is intended to be helpful to the person making the inquiry.”78

166. The Committee has already recommended that all the relevant parties should be brought together to discuss the settlement of claims and that a matrix might be considered particularly for liabilities resulting from the Bainbridge judgement (recognising, however, that individuals do have the right to take a case to employment tribunal). On the same basis, the Committee further recommends that the issue of staged payments should form part of these discussions.

Overall conclusions

167. The Committee shares the concerns expressed by other parliamentary committees that it has taken so long to implement Single Status and believes it is not surprising that a number of legal rulings and case law have developed in the intervening period which have impacted on the number and complexity of equal pay cases.

168. The Committee is also concerned that these delays may have led to low-paid women workers losing out. These workers might have been entitled to upgrading and backdated compensation but, as a result of the delays in settling, may have left or retired without being aware that they could make a claim or may not have received sufficient compensation for the years of unequal treatment, because of the five year time limit.

169. In evidence to the Committee, all parties expressed a willingness for the issues to be resolved, however there did not appear to be agreement over how to take things forward. In addition, this has become a litigious situation and therefore all sides seem to be exercising a degree of caution which is not conducive to reaching negotiated settlements. Joe di Paola from COSLA commented that “a series of judgements have meant that everybody takes every single part of an agreement back to their lawyers to have it checked out”.79

170. The Committee believes this is deeply regrettable and serves no-one well, least of all the claimants. For these reasons, the Committee has recommended that all the relevant parties should enter into discussions to resolve these issues and that these discussions should be facilitated by the Scottish Government. Where it is possible to achieve a negotiated settlement, every effort should be made to reach one. This gives greater certainty to the individuals over the amount of compensation they will be given and it can give greater certainty over the costs to local authorities. Such discussions might also help to bring trust back to relationships between the parties.

171. However, this is not just about resolving past discrimination, it is about ensuring that discrimination does not occur in the future and that such lengthy and complex arguments do not arise again. That will give the greatest certainty.

Annexe A: extracts from the minutes of the local government and communities committee

1st Meeting, 2009 (Session 3), Wednesday 14 January 2009

1. Decision on taking business in private: The Committee agreed to take item 4 in private.

4. Work programme (in private): The Committee agreed its approaches to its work on Homelessness and Housing Supply and on Equal Pay. The Committee appointed John Wilson as a reporter to the Equal Opportunities Committee on equal pay.

3rd Meeting, 2009 (Session 3), Wednesday 28 January 2009

1. Decision on taking business in private: The Committee agreed to take item 10 in private and to take its consideration of a draft report on the National Planning Framework 2 in private at future meetings.

10. Work programme (in private): The Committee agreed its approach to its work on Equal Pay.

7th Meeting, 2009 (Session 3), Wednesday 11 March 2009

Equal Pay in Local Government: Members made a declaration of interest. John Wilson declared he was a member of Unite, Duncan McNeil and Patricia Ferguson declared they were members of GMB and Bob Doris declared he was a member of EIS.

The Committee took evidence from—

Mark Irvine, Action 4 Equality Scotland;

Glyn Hawker, Scottish Organiser, Bargaining and Equal Pay, UNISON;

Alex McLuckie, Senior Organiser, GMB Scotland.

8th Meeting, 2009 (Session 3), Wednesday 18 March 2009

Equal Pay in Local Government: The Committee took evidence from—

Philip Barr, Head of Human Resources, City of Edinburgh Council;

Norrie Williamson, Director of Finance, and Peter Dawson, Corporate Human Resources Manager, East Renfrewshire Council;

John O'Hagan, Executive Director of Corporate Services, North Lanarkshire Council;

Graham Johnston, Head of Finance, Shetland Islands Council.

11th Meeting, 2009 (Session 3), Wednesday 22 April 2009

Equal pay in Local Government: The Committee took evidence from—

Joe di Paola, Head of the Employers Organisation, and Councillor Michael Cook, Spokesperson for Strategic Human Resources Management, COSLA.

12th Meeting, 2009 (Session 3), Wednesday 29 April 2009

Equal pay in Local Government: The Committee took evidence from—

John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, Graham Owenson, Head of Local Government Finance Team, and Kirstie Campbell, Local Governance Team Leader, Scottish Government.

15th Meeting, 2009 (Session 3), Wednesday 20 May 2009

Decision on taking business in private: The Committee agreed to take item 3 in private. The Committee also agreed to take the consideration of a draft report on equal pay at future meetings in private.

16th Meeting, 2009 (Session 3), Wednesday 27 May 2009

Equal Pay in Local Government (in private): The Committee considered a draft report and agreed certain changes.

17th Meeting, 2009 (Session 3), Wednesday 3 June 2009

Equal Pay in Local Government (in private): The Committee agreed a final draft of its report.


Footnotes:

1 Scottish Parliament Finance Committee: 4th Report, 2006 (Session 2) Report on the Financial Implications of the Local Authority Single Status Agreement

2 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1918

3 The Tribunals Service. Written submission

4 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1939

5 Action 4 Equality. Written Submission

6 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1812

7 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1812

8 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1812

9 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1810

10 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1917

11 Scottish Parliament Local Government and Communities Committee. Official Report, 11 March 2009, Col 1785

12 Scottish Parliament Local Government and Communities Committee. Official Report, 11 March 2009, Col 1785

13 Scottish Parliament Local Government and Communities Committee. Official Report, 11 March 2009, Col 1785

14 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1805

15 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1819

16 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1815

17 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1914

18 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1915

19 Scottish Parliament Local Government and Communities Committee. Official Report, 29 April 2009, Col 1965

20 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1807

21 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1809

22 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1808

23 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1809

24 Scottish Parliament Equal Opportunities Committee. Official Report, 24 February 2009, Col 828

25 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1808

26 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1922

27 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1819

28 Scottish Parliament Equal Opportunities Committee. Official Report, 24 February 2009, Col 828

29 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1810

30 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1941

31 Scottish Parliament Local Government and Communities Committee. Official Report, 11 March 2009, Col 1764

32 Scottish Parliament Local Government and Communities Committee. Official Report, 11 March 2009, Col 1787

33 Scottish Parliament Local Government and Communities Committee. Official Report, 29 April 2009, Col 1943

34 Scottish Parliament Local Government and Communities Committee. Official Report, 11 March 2009, Col 1786

35 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1931

36 Scottish Parliament Equal Opportunities Committee. Official Report, 24 February 2009, Col 839

37 Unison Scotland. Written submission

38 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1931

39 Scottish Parliament Equal Opportunities Committee. Official Report, 24 February 2009, Col 831

40 Scottish Parliament Local Government and Communities Committee. Official Report, 11 March 2009, Col 1751

41 Scottish Parliament Local Government and Communities Committee. Official Report, 11 March 2009, Col 1770

42 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1927

43 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1927

44 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1928

45 Equality and Human Rights Commission: News release 26 March 2009 (Available at: http://www.equalityhumanrights.com/en/scotland/news/Pages/CommissioninvestigatesequalpayinGlasgowCityCouncil.aspx

46 Scottish Parliament Local Government and Communities Committee. Official Report, 11 March 2009, Col 1782

47 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1817

48 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1928

49 Scottish Parliament Equal Opportunities Committee. Official Report, 24 February 2009, Col 830

50 Scottish Parliament Equal Opportunities Committee. Official Report, 24 February 2009, Col 832

51 Audit Scotland: Best Value 2 Proposals for Consultation [Available at: http://www.audit-scotland.gov.uk/BV2/docs/bv_090331_bv2_consultation_report.pdf]

52 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col

53 Scottish Parliament Local Government and Communities Committee. Official Report, 29 April 2009, Col 1960

54 Audit Scotland (2009): Overview of the local authority audits 2008 (Available at: http://www.audit-scotland.gov.uk/docs/local/2009/nr_090226_local_authority_overview.pdf

55 Audit Scotland (2009): Overview of the local authority audits 2008 (Available at: http://www.audit-scotland.gov.uk/docs/local/2009/nr_090226_local_authority_overview.pdf

56 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1922

57 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Cols 1920 and 1921

58 Scottish Parliament Local Government and Communities Committee. Official Report, 11 March 2009, Col 1770

59 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1810

60 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1807

61 Scottish Parliament Equal Opportunities Committee. Official Report, 24 February 2009, Col 831

62 Scottish Parliament Local Government and Communities Committee. Report on the Scottish Government’s Draft Budget 2009-10

63 COSLA. Written Submission

64 Correspondence from Audit Scotland to Equal Opportunities Committee 3 April 2009

65 Scottish Parliament Local Government and Communities Committee. Official Report, 11 March 2009, Col 1788

66 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1814

67 Scottish Parliament Local Government and Communities Committee. Official Report, 18 March 2009, Col 1814

68 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1925

69 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1935

70 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1937

71 Scottish Parliament Local Government and Communities Committee. Official Report, 29 April 2009, Col 1944

72 Scottish Parliament Local Government and Communities Committee. Official Report, 29 April 2009, Col 1957

73 Scottish Parliament Local Government and Communities Committee. Official Report, 29 April 2009, Col 1945

74 Scottish Parliament Local Government and Communities Committee. Official Report, 29 April 2009, Col 1945

75 Scottish Parliament Local Government and Communities Committee. Official Report, 29 April 2009, Cols 1947 and 1948

76 Scottish Parliament Local Government and Communities Committee. Official Report, 29 April 2009, Col 1967

77 Scottish Parliament Local Government and Communities Committee. Official Report, 29 April 2009, Col 1962

78 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1932

79 Scottish Parliament Local Government and Communities Committee. Official Report, 22 April 2009, Col 1939