More than half the cost of meeting UNISON’s £1.20 pay claim for local government and school support workers would be offset by workers paying higher tax and national insurance contributions and receiving less in tax credits and benefits, according to a new report into the cost of meeting the Living Wage from 1 April 2014.

Research for UNISON by the New Policy Institute (NPI) reveals that the cost of meeting the pay claim would be significantly lower than previously reported, with higher pay resulting in reductions in tax credits and in-work benefits. Central government would also enjoy a windfall as a result of higher tax and national insurance revenue from workers and employers.

The report highlights that if pay was to rise in line with the pay claim, central government would receive an additional £410m from higher tax payments, £160m from lower benefit spending and £190m from higher employer National Insurance contributions. Central government would also benefit from the indirect taxes on expenditure from higher net earnings, estimated to be worth £145m a year.

This would reduce the cost of paying the claim in real terms from £1.4b to £645m, representing a 55% saving to the public sector.

The unions’ original pay claim was for a minimum of £1 an hour at each point on the pay scale. This would bring the lowest paid workers to the level of the Living Wage and provide a modest increase for workers who have suffered a three year pay freeze. However with the Living Wage increasing last month by 20p to £7.65 and £8.80 in London, unions are asking for £1.20 an hour to reflect the new rate.

UNISON’s Head of Local Government, Heather Wakefield, said:

“All local government workers should be paid at least the Living Wage, which would start to restore the 18% cut they have suffered since the Coalition took office. No other group of public sector workers earns below the Living Wage.

“Politicians from all sides are calling for action to end low pay and introduce the Living Wage. If they are serious, they should put their own house in order and make sure that one million local government and school support workers are lifted out of poverty and given the £1.20 an hour increase we are calling for.

“77% of local government and school support workers are women and this is increasingly looking like discrimination against those women, who care, cook, clean, and educate children.”