Councils are to be allowed to borrow £500m to help settle thousands of equal pay claims among their staff – a move welcomed by the biggest local government union.
The move affects 46 local authorities across England which were facing the threat of legal action by trade unions on behalf of low-paid, mainly female, workers.
Capitalisation gives permission to local authorities to meet revenue costs out of capital resources, either through borrowing or capital receipts.
Local government minister John Healey said: “Local authorities have to settle their equal pay obligations, but we recognise the position for many is tough, and I want to do what I can to give them the financial flexibility they need to implement fair pay systems.”
However, he repeated the government’s warning that equal pay was “not a new pressure”.
Unison welcomed the decision as a “significant breakthrough” in its long-running battle for pay equality.
General secretary Dave Prentis said: “The announcement is a direct response to our call for funding for equal pay. It clearly demonstrates a commitment towards the principles of equal pay, and to listening and acting on the issues of concern to trade unions and our one million women members.”
Last year, there were 35 equal pay capitalisation applications approved by the government, totalling £160.5m.