14 New Mart Road Edinburgh EH14 1RL Telephone 0131 442 8930 www.apuc-scot.ac.

uk

29 November 2012 Mr John Park MSP The Scottish Parliament Edinburgh EH99 1SP Dear Mr Park Living Wage (Scotland) Bill Please find enclosed the response from Advanced Procurement for Universities and Colleges to the consultation paper on the Living Wage (Scotland) Bill. This is a representative body response although some institutions may also choose to issue submissions on their own right which may vary in some detailed aspects to this generic response. We have provided feedback against the specific questions as requested (Enclosure 1 within this letter), however we would like to highlight some concerns below as they impact on the University and College sector in Scotland. The Scottish Government has already received feedback from the European Commissioner for Internal Market and Services advising that the Living Wage cannot be implemented through public procurement procedures. It is highly likely that any Bill requiring such steps would encourage public sector organizations to breach EU procurement regulations. A requirement to impose the Living Wage on all public sector contractors in Scotland would significantly impact effective use of public sector budgets, in particular the already stretched University and College sectors, detrimentally impacting service delivery. The cost of service delivery by Scottish businesses would become uncompetitive compared to the rest of the UK. If the minimum wage is too low, then the appropriate approach would be for it to be raised across the whole of the UK, therefore avoiding disadvantage to the Scottish economy and avoiding providing a significant unfair commercial advantage to businesses south of the border.

APUC Limited, Registered Office: 14 New Mart Road, Edinburgh, EH14 1RL Incorporated in Scotland SC314764 VAT Registration Number 974 9816 54

Imposing selection criteria in the tender process of complying with the Living Wage will exclude organisations that do not or cannot comply. A large number of these organisations would possibly be SMEs contradicting the Scottish Governments aim to increase participation by SMEs in public sector contracts.

The Scottish education sectors have significant value in maintaining Scotlands international image and are well positioned worldwide in the further education sector. As such we are sure you can appreciate the risk imposing such a bill could have on the ability of our institutions to maintain such high standards of service provision should their own service delivery costs increase as well as that of their service providers. We hope that this feedback is deemed to be constructive and of value to you, please do not hesitate to contact me if you are unclear about any aspects of the letter. Yours sincerely

Angus Warren Chief Executive (Enc 1: APUC response to questions)

APUC Limited, Registered Office: 14 New Mart Road, Edinburgh, EH14 1RL Incorporated in Scotland SC314764 VAT Registration Number 974 9816 54

Living Wage (Scotland) Bill Enc 1: Advanced Procurement for Universities and Colleges Response Q1. Do you support the general aims of the proposed Bill? (as outlined in paras 32 to 39). Please indicate Yes/No/Undecided and explain reasons for your choice. Undecided. Where viable and within the constraints of EU Procurement Regulations, organisations that can afford to improve the pay conditions (over and above compliance with the statutory minimum wage) of its staff can clearly aid towards a better standard of living for those staff. However, this is a luxury not all organisations can afford and a general sweeping enforcement (whilst quite likely being out with current EU procurement legislation) could also detrimentally impact some organisations. If there is sound justification for the Living Wage being a minimum salary level, then this should be enforced through the National Minimum Wage to prevent further barriers to competition being introduced (through adoption of differing minimum salaries by companies) and also to prevent further inequality (through some companies following the Living Wage and some not, or applying to some staff and not all). Clearly salary is not the only consideration in eradicating poverty and inequality measures need to be in place to ensure a rise in minimum wage (either through national minimum wage or living wage) is not eliminated by a faster, and larger, rise in the cost of living. To introduce the Bill only in Scotland, and not as a national standard, will likely lead to organisations that cannot comply being unable to win public sector business, and those that can comply may lose business to companies with lower wage rates (i.e. out with Scotland / EU). Q2. Do you envisage any issues for public sector bodies when including the Living Wage as a contract performance condition of a contract? Please explain the reasons for your answer. Yes. It is unclear how this condition could be included as a contract clause (which it would require to be, as it would be a minimum standard at selection phase). The EC has already advised the Scottish Government that it is not possible to mandate payment of the living wage through procurement processes. To include this at this time could result in further tender process challenges and award delays for organisations and would exclude a large number of SMEs from being able to participate, contradicting the Scottish Governments drive to increase SME participation. Q3. What do you consider will be the advantages or disadvantages for employers and employees if public sector performance clauses stipulate the payment of the Living Wage? Initially payment of a Living Wage will seem favourable to employees, however if this is not sustainable companies may not have sufficient funds to support an increase in overheads, or may suffer reduced turnover due to loss of business then there is a risk of job losses, or other employment benefits being affected. Q4. Which public sector bodies should use contract performance clauses to deliver the Living Wage? Please include the reasons for your choice. It should be an organisations decision whether to implement the Living Wage or not based on its own review of feasibility and impacts. Forcing public sector bodies to implement this increases service cost, squeezing already tight public sector budgets even further, risking service delivery. Q5. Which bodies should be mandatory consultees? Please include the reasons for your choice. Centres for Procurement Expertise should be consulted, as sector representatives.

APUC Limited, Registered Office: 14 New Mart Road, Edinburgh, EH14 1RL Incorporated in Scotland SC314764 VAT Registration Number 974 9816 54

Q6. What information must be included in the Scottish Ministers report to the Scottish Parliament? Please explain the reasons for your answer. The report should include an assessment on value for money how the service and goods procured under the requirements of the Living Wage Bill compare against budget. Budget allocation and impact of increased contract labour costs should be monitored. Q7. What is your assessment of the likely financial implications of the proposed Bill to you or your organisation; if possible, please provide evidence to support your view? What (if any) other significant financial implications are likely to arise? The actual cost implications are extremely difficult to determine, however the cost of contract/service delivery to institutions in Scotland would rise significantly, affecting budget allocation and overall service delivery to students. Q8. Is the proposed Bill likely to have any substantial positive or negative implications for equality? If it is likely to have a substantial negative implication, how might this be minimised or avoided? The Bill could have negative impacts on equality for several reasons; companies that are rarely / never involved in public sector contracts have no further impetus to pay staff the living wage. Companies that require to adhere to the bill may choose to do so only marginally , for example by only paying staff that work on public sector contracts the living wage for the hours on that contract and a different rate for other work. There is also the potential for staff at same level in a company to be paid different rates simply for working on different contracts. Further, imposing the bill in Scotland but not other areas of the UK would place Scottish companies at a competitive disadvantage (through increased labour rates) in comparison to counterparts that do not have to adhere to the Bill. Q9. Any other comments or suggestions relevant to the proposal. The Bill does not identify whether the proposal is to get all Scottish public sector organisations adopting the Living Wage, i.e. paying its own staff this wage, or if it is to force such organisations to have their contractors paying staff such a wage simply that the aim is increase the number of people being paid the Living Wage. The Bill does not outline how it would be enforced on companies out with Scotland. There may be a secondary risk that raising pay would negatively affect benefits received by some families (i.e. pay rise reduces benefits allowed, but the net impact is a reduced overall value to the employee). The term Contract Performance Clause it too undefined. It should be clear whether you intend this to be a contractual term (in selection criteria, award criteria or terms and conditions) or a service level agreement, or key performance indicator. Consider whether it is feasible to expect a one size fits all living wage, given the cost of living varies geographically (it may be unreasonable to assume the living wage is the same in all areas of Scotland, as it is widely recognised that the cost of living varies geographically).

APUC Limited, Registered Office: 14 New Mart Road, Edinburgh, EH14 1RL Incorporated in Scotland SC314764 VAT Registration Number 974 9816 54