Council pay body calms salary fears in wake of Iceland bank fiasco

Local councils have moved to calm fears that pay will be hit by the Icelandic banking fiasco.

It emerged last week that 116 councils had invested a total of £858m in failed Icelandic financial institutions – much of which could be lost forever.

Thirteen councils admitted they were facing financial trouble, but pay body Local Government Employers moved to assure staff there would be no problems paying wages or meeting the 2.45% pay rise offer made in April.

Trade unions rejected that offer and demanded a 6% hike to help staff cope with soaring inflation. The dispute has gone to conciliation service Acas, and a spokeswoman for public sector union Unison told Personnel Today last week there were fears local authorities would now be even less willing to negotiate.

“There are millions of pounds at risk and, whatever they say, there are bound to be consequences. We’re worried about councils cutting services and jobs,” she said. “They will use any excuse not to pay a decent rate and will try to use that card [that they lost money in Iceland], but we won’t change our demands.”

Jim Savege, part of the LGE negotiations board, insisted the council pay offer would not change.

“It’s our final offer, and I can’t see any situation where it would be reduced at all,” said Savege, who is also lead on pay for the Public Sector People Managers Association.

“We’re aware there’s a creeping anxiety around the workplace in terms of redundancy and employment, and some people will be anxious about that,” he said.

On Friday, unions and some councils agreed on terms that would see council staff receive a 2.45% pay rise until a decision from Acas, which Unison feared may not come before 2009.

“Rather than waiting for the national negotiations to conclude, we’re making an effort to get money into staff’s pockets at a time when they need it most,” said Savege.

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