Forcing firms to pay the £7.45-an-hour Living Wage to win government contracts 'could be illegal', Downing Street warns

  • Living Wage rate today rose to £8.55-an-hour in London and £7.45 in the rest of the country
  • Ed Miliband wants to see if Whitehall can 'use its power' to insist employers sign up to ease the 'living standards crisis'
  • But Downing Street warns it could fall foul of EU procurement laws

By Jason Groves for the Daily Mail

Published: | Updated:


Ed Miliband used a speech at Islington Town Hall to warn five million people in Britain are not earning the living wage

Ed Miliband used a speech at Islington Town Hall to warn five million people in Britain are not earning the living wage

Ed Miliband’s plan to force thousands of companies to pay a ‘Living Wage’ could be illegal – and leave the taxpayer open to compensation claims, Downing Street warned yesterday.

No 10 said ministers had no plans to follow the Labour leader’s call to require all government suppliers to pay a ‘Living Wage’ of up to £8.55 an hour.

A spokesman said that, although Mr Cameron had backed the Living Wage campaign in opposition, the Government’s legal advice was that forcing firms to pay it would potentially break European Union procurement laws.

Labour described the Government’s response as ‘pathetic’ and said expansion of the Living Wage initiative could benefit up to five million low-paid workers.

And, in an intervention that will embarrass Mr Cameron, London Mayor Boris Johnson announced that the Living Wage in the capital will be increased by 25p an hour to £8.55.

The rate outside London was increased by a similar amount yesterday to £7.45 an hour.

Someone earning the new London rate would make almost £5,000 a year more than someone working 40 hours a week on the National Minimum Wage of £6.19 an hour.

Mr Johnson, whose Greater London Authority is committed to paying the higher rate, called for all local authorities in London as well as Whitehall to pay the Living Wage.

‘By building motivated, dedicated workforces, the Living Wage helps businesses to boost the bottom line and ensures that hard-working people who contribute to London’s success can enjoy a decent standard of living,’ he added.

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Mr Miliband was greeted at Islington Town Hall to mark the start of Living Wage Week by shadow chief secretary to the Treasury, Rachel Reeves

Mr Miliband was greeted at Islington Town Hall to mark the start of Living Wage Week by shadow chief secretary to the Treasury, Rachel Reeves

Mr Miliband said the Living Wage could help tackle Britain’s ‘living standards crisis’.

He added: ‘Too many people in Britain are doing the right thing and doing their bit, helping to build the prosperity on which our country depends, but aren’t sharing fairly in the rewards.’

But Government sources said yesterday that forcing employers to pay a certain wage in order to bid for public sector contracts was potentially in breach of EU laws.

A previous attempt to require government suppliers to pay a special minimum wage in one region of Germany was ruled illegal by the European Court of Justice.

Boris Johnson announced the new living wage rate in London will be worth £8.55-an-hour

Boris Johnson announced the new living wage rate in London will be worth £8.55-an-hour

The Mayor of London said the new rate will be worth £4.5 million a year for lower-paid workers

The Mayor of London said the new rate will be worth £4.5 million a year for lower-paid workers

Video: Ed Miliband explains his plan to achive a 'living wage'

 

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