Living Wage (Scotland) Bill

SCVO response 7 December 2012

Summary
SCVO strongly supports the aim of this Bill. Public procurement in Scotland is calculated at 9 Billion per year, and whilst at present it is seen as a primary driver of economic growth, SCVO believes that procurement should be refocused to support positive social outcomes. The provision of the Living Wage will also support local economies and stimulate growth as many of those who are classed to be in in-work poverty will be lifted through the provision of the Living Wage. Public procurement has the power to promote positive social outcomes for Scotlands communities not just promote economic growth. Through the proliferation of the Living Wage public procurement can support thousands of workers across Scotland, their families and their communities. SCVO fully backs the plans laid out in this consultation.

Contact:
David McColgan Policy Officer Scottish Council for Voluntary Organisations, Mansfield Traquair Centre, 15 Mansfield Place, Edinburgh EH3 6BB Email: [name]@scvo.org.uk Tel: 0131 556 3882 Web: www.scvo.org.uk

Our response
SCVO welcomes the opportunity to respond to this consultation and would like to contribute to the following questions: QUESTION 1: Do you support the general aims of the proposed Bill? (as outlined in paragraphs 32 to 39 above). Please indicate yes/no/undecided and explain the reasons for your response. SCVO strongly supports the aim of this Bill. Public procurement in Scotland is calculated at 9 Billion per year, and whilst at present it is seen as a primary driver of economic growth, SCVO believes that procurement should be refocused to support positive social outcomes. The provision of the Living Wage will also support local economies and stimulate growth as many of those who are classed to be in in-work poverty will be lifted through the provision of the Living Wage. QUESTION 2: Do you envisage any issues for public sector bodies when including the Living Wage as a contract performance condition of a contract? Please explain the reasons for your answer. It is clear that and condition for contractors to pay the Living Wage will have financial implications for public bodies. In the current economic climate and the pressure on public finances there is a risk for public agencies regarding the payment of Living Wage in contracts. It is clear to SCVO that there is direct correlation that public agencies requiring a contractor to pay the Living Wage, while require the public agency to increase a contract price which is sufficient to enable the successful bidder to do so without sacrificing something else. It is important to address the current relation between procurement and Best Value also. In our response to the Procurement Reform Bill SCVO highlighted the current relationship with procurement and competitive tendering. Whilst competitive tendering is the method of choice organisation are pitted against one another to offer the best value contract. If Living Wage is to become a condition in public procurement it is imperative that public bodies ensure contract sizes are appropriate enough to cover the payment of Living Wage and not expect successful contractors to top-up wages. If living wage was to be attached to public sector contracts then public bodies will need to face up to the cost differential and increase the value of contracts awarded. QUESTION 3: What do you consider will be the advantages or disadvantages for employers and employees if public sector performance clauses stipulate the payment of the Living Wage? The evidence of advantages are clear on the payment of living wage Trust for London commissioned Queen Mary, University of London to explore the costs and benefits of a London Living Wage (LW), including examining workplaces before and after

they introduced the LW as well as comparisons with workplaces where the LW was not paid. Over 400 low-paid workers were surveyed. Key findings include: Over half of employees (54%) felt more positive about their workplace once the LW was introduced and 52% felt more loyal. Staff leaving rates fell by 25%. Almost a third (32%) of workers felt it benefitted their family life by allowing them to do things like spend more time with family. Almost 4 in 10 (38%) workers reported financial benefits such as being able to buy more goods and save more. Reputational benefits to companies paying the LW were significant, including helping to attract new business/customers and in recruiting staff to professional roles. Workers in LW workplaces had better psychological well-being than those in non-LW workplaces. Wage cost increases associated with introducing the LW were 6% of the contract cost on average, despite low-paid staff receiving much higher increases in their hourly rate of pay (an average of 26%). The cost increase was mitigated through savings such as reviewing working practices, reducing management overheads and in some cases, reducing working hours. Savings from reduced staff turnover (such as recruitment savings and reduced levels of sickness) were low and on average represented 0.3% of overall costs. The London LW makes a significant difference to the disposable income of households that do not claim (or are ineligible to claim) welfare benefits and tax credits. The financial impact on those claiming these benefits and credits is much lower as the entitlements reduce as wages rise. The introduction of Universal Credit will improve this situation. If all low-paid Londoners were paid a LW this could save the Government 823 million per annum by increasing the taxbase and reducing welfare benefit spending.

The full key findings and report can be downloaded from: http://www.trustforlondon.org.uk/media-centre/news/100000-increase-in-london-jobs-payingpoverty-wages-1.html However there are potential detrimental impact on Third sector organisations. 1. Many third sector organisations already subsidise wages of staff through other income sources due to the low value of contracts. If living wage were to be stipulated within public sector contracts public bodies would have to accept that the value of contracts would need to increase in line with the increase in wages. QUESTION 4: Which public sector bodies should use contract performance clauses to deliver the Living Wage? Please include the reasons for your choice. Any public body that is committed to the payment of Living Wage for its staff should ensure that contracted services that deliver on their behalf do so too. QUESTION 6: What information must be included in the Scottish Ministers report to

the Scottish Parliament? Please explain the reasons for your answer. It is important to make sure the report is meaningful and does not become an annual exercise of number crunching. Any report should set down the baseline figure of the provision of the Living Wage within the public sector and then present an annual plan to increase the proliferation of the Living Wage including; reasonable targets, marketing plans, etc. QUESTION 8: Is the proposed Bill likely to have any substantial positive or negative implications for equality? If it is likely to have a substantial negative implication, how might this be minimised or avoided? The Bill as presented would have only positive impacts on equality. It would ensure that Living Wage is paid to all public sector contracted services and therefore support payment to young and old workers, male and female. The Bill could have an important role in supporting the reduction in the pay-parity of male and female workers. About us The Scottish Council for Voluntary Organisations (SCVO) is the national body representing the third sector. There are over 45,000 voluntary organisations in Scotland involving around 137,000 paid staff and approximately 1.2 million volunteers. The sector manages an income of 4.4 billion. SCVO works in partnership with the third sector in Scotland to advance our shared values and interests. We have over 1300 members who range from individuals and grassroots groups, to Scotland-wide organisations and intermediary bodies. As the only inclusive representative umbrella organisation for the sector SCVO:

has the largest Scotland-wide membership from the sector our 1300 members include charities, community groups, social enterprises and voluntary organisations of all shapes and sizes our governance and membership structures are democratic and accountable - with an elected board and policy committee from the sector, we are managed by the sector, for the sector brings together organisations and networks connecting across the whole of Scotland

SCVO works to support people to take voluntary action to help themselves and others, and to bring about social change. Our policy is determined by a policy committee elected by our members.1 Further details about SCVO can be found at www.scvo.org.uk.

SCVOs Policy Committee has 24 members elected by SCVOs member organisations who then coopt up to eight more members primarily to reflect fields of interest which are not otherwise represented. It also includes two ex officio members, the SCVO Convener and Vice Convener.

References Scottish Voluntary Sector Statistics 2010, SCVO www.scvo.org.uk/evidencelibrary/Home/ReadResearchItem.aspx?f=asc&rid=1078