No wonder the popularity of the EU has taken a knock in the UK. Every time there is a dispute over the interpretation of EU legislation there is no one body in the UK you can go to in order to receive a definitive interpretation. The latest stooshie is over the introduction in Scotland of a “living wage” through the public sector procurement system. As it so happens this is being done in London by Boris Johnson but was challenged through no less than two separate legal opinions by his own party’s ministers. Here’s a report of the maelstrom:

“Ministers commissioned two separate legal opinions on the London Mayor’s scheme in the last two years and both found “risks” that it breached rules on procurement, the Telegraph has learnt Mr. Johnson is understood to reject the assessment. The Mayor’s office said thousands of people working on the capital’s transport network, policing and fire authorities had already benefited from his policy. They will be entitled to at least £8.55 per hour this year, the minimum judged by the “living wage” campaign to be necessary for a decent standard of life. Mr. Johnson called for the rate to be paid by all local authorities in London, as well as across Whitehall departments. “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.” The Greater London Authority group, including the Mayor’s policing, fire, and transport departments, includes the living wage “as a requirement” when contracts are let or renewed.

The Scottish Government’s opinion was contained in a policy note after taking advice from the European European Commission. No brave rejection from Edinburgh:

“The European Commission has clarified that public bodies cannot require contractors to pay their employees a living wage as a condition of participating in a tendering exercise or through a contract performance clause. Public bodies can, if they wish, still encourage contractors to pay their employees a living wage.”

A requirement regarding the payment of a ‘living wage’ would in practice be linked to the tasks necessary for the performance of the contract, and therefore be used as a contract performance clause. Such clause would have to be non-discriminatory and known in advance by all candidates for transparency reasons. The EU Parliament, in response to a parliamentary question about Living Wage contract conditions, provided helpful clarification on this issue:

“Living wage conditions may be included in the contract performance clauses of a public procurement contract ‘provided they are not directly or indirectly discriminatory and are indicated in the contract notice or in the contract documents’. In addition, they must be related to the execution of the contract. In order to comply with this last condition, contract performance clauses including living wage conditions must concern only the employees involved in the execution of the relevant contract, and may not be extended to the other employees of the contractor. In summary our advice to authorities is therefore:

for all service contracts a consideration of social value must be carried out pre-procurement and this may be an opportunity to consider whether the Living Wage is a relevant and proportionate matter for the contract under consideration;

it may be easier (arguably less amenable to challenge) to include the Living Wage as a contract performance condition than to use the Living Wage requirement as a contract award criterion;

a Living Wage contract condition must be relevant and proportionate in respect of the contract being tendered and should not seek to go beyond those employees engaged on the contract, in line with the EU Parliament clarification of 2009;

the authority will need to ensure transparency about the fact that it has a Living Wage performance condition by making this clear on the face of the OJEU notice and/or the tender documents. Ideally we would advise specific reference to the condition in the OJEU notice itself.”

So it seems the Scottish Government gave up much too early. Paying a ‘living wage’ has a range of potential benefits to workers, companies and the government, according to an academic study commissioned by campaigners. The study looked at the experiences of workers and companies in London where the living wage has been introduced. The London living wage was calculated to be £8.30 an hour in 2011, based on what was needed by the average household type to cover basic living costs. This compares with the current minimum wage of £6.08. The key findings of the report were:

Over half of employees (54 per cent) felt more positive about their workplace once the living wage was introduced. Staff leaving rates fell by 25 per cent.

Reputational benefits to companies were significant, including helping to attract new business/customers and recruiting professional staff.

Wage cost increases associated with the living wage averaged 6 per cent, despite low-paid staff receiving much higher increases than this in their hourly rate of pay (an average of 26 per cent). The cost increase was offset through savings such as new working practices, lower management overheads, and in some cases reduced working hours.

The London living wage made a significant difference to the disposable income of households that did not claim (or were ineligible to claim) social security benefits and tax credits.

If all low-paid Londoners were paid a living wage this could save the government £823 million a year by increasing the tax base and reducing benefit spending.

The minimum wage should be raised to the living wage level.