Supplements aim to help staff working in and around capital

The issue of allowances paid to reflect where people work within the UK is a longstanding one. The notion of “London Weighting” originates in the 1920s and was an attempt to calculate the additional costs borne by those working in London as compared with people working elsewhere in the UK.

That approach has been largely abandoned by government and other employers in favour of measures which are largely determined by supply and demand; recruitment and retention tend to be the only issues which influence the payment of allowances. However, it remains the case that people working in London incur higher costs than those working in the UK generally and the most expensive element is housing costs.

Housing costs

The latest figures from Land Registry are for April 2013 and show that the average property price across England and Wales was £161,458, but the equivalent figure for London was £375,795 – a gap of £214,337.

The gap between prices in London and the whole of the UK has widened in the year to April 2013 as prices in the capital have risen by 6.2%, while for the UK as a whole the increase was only 0.7%.

In fact several regions have seen house prices falling during the year, with the North East showing the largest fall of 5.7%, followed by the North West (3.7%), then Wales (2%), and both the East Midlands and Yorkshire and the Humber saw prices falling by 1.2%. The remaining regions saw increases, but after London the next highest increase was 1.4% in south east England.

It’s much the same story with rents. Figures from the Valuation Office Agency (VOA) for the year to 31 March 2013 show private sector rents in London are almost double that for the whole of England. For London the average rent is £1,425 a month while for England as whole the figure is £724 a month. This means Londoners are paying on average £8,412 a year more in rent.

The Office for National Statistics will, on 26 June, be publishing a new measure called the Index of Private Housing Rental Prices. This will enable wider regional comparisons of rent levels to be made than can be made at the moment.

Meanwhile, council rents continue to rise sharply. According to Inside Housing magazine, the vast majority of council tenants will face rent hikes of between 4.5% and 6% this year, with an average increase of 5.1%.

London allowance rates

The two tables nelow show allowances currently payable, drawn from the Labour Research Department’s Payline database of collective agreements. They are divided into public and private sector and then ranked in order by the highest allowance for inner or single London payable under that particular agreement.

As well as giving the allowance for inner or single London, any allowances payable in outer London, fringe London and other south east (where known) are also shown.

Across both sectors the majority of the agreements show no increases at all, but the private sector shows increases in over a third of the agreements while in the public sector it is just one sixth that feature an increase (and that includes the police, where the increase is only in the smaller element of the allowance — see notes to table).

Where we do not know the percentage increase in an allowance we have used “n.k.” to indicate this.

Most agreements describe the premium for working in London as either an allowance or as a weighting payment. The Metropolitan Police is unusual in having both; their London Allowance stands at £4,338 (paid to those appointed since 1994 and unchanged since 2000) and their London Weighting payment, from 1 July 2013, rose to £2,301 giving a total of £6,639 a year. Outside of London there are allowances of £2,000 a year to officers in Essex, Hertfordshire, Kent, Surrey and Thames Valley and £1,000 a year in Bedfordshire, Hampshire and Sussex.

The police allowance is a single London payment, but some agreements differentiate between inner and outer London. This is sometimes done on the basis of the inner and outer London boroughs or on miles from Charing Cross (commonly up to four miles from Charing Cross being defined as inner London and from four to 16 miles as outer London).

Another approach adopted by some employers is to use the M25 motorway as the boundary for an allowance. The distinction between inner and outer London was at one time linked to the former calculations for London Weighting which sought to calculate the additional costs for those working in the two zones and found that those working in inner London faced higher costs than those working in outer London.

Among other factors travel to work distances and times are higher for those working in inner London than in outer London (and for London as a whole much higher than the rest of the UK).

Regional pay grades

Many employers, rather than paying specified allowances for London and other regions, have separate pay grades based on locations.

Examples include many of the civil service agreements, such as the Department for the Environment, Food and Rural Affairs (DEFRA) where the premium for working in London ranges from £311 in outer London on the lowest grade up to £5,280 working in inner London on the highest grade. Some have regional grades but a common premium, such as the Department for Business, Innovation and Skills (BIS) where the gap between London and national grades is a consistent £3,500 a year.

In the private sector, premia at business services group Accenture range from £1,603 up to £3,207 while at rail freight group DB Schenker Rail groundstaff have premia ranging from £1,328 up to £2,939.

Payline - www.lrd.org.uk/index.php?pagid=18

London Living Wage

The campaign for a Living Wage was launched by London Citizens in 2001, but demand for such a wage has grown stronger over the past few years. There are now nearly 120 employers in London signed up to the campaign, including a number of London Borough councils.

The London Living Wage is at present set at £8.55 an hour, although the Greater London Authority will produce an updated figure in November. The present rate of £8.55 represents a 3% increase on the 2011 figure of £8.30 an hour. In contrast, the Living Wage figure for the rest of the UK is set at present at £7.45 an hour.

A report from Trust for London, The costs and benefits of the London living wage, researched by Jane Wills and Brian Linneker of Queen Mary University of London, was published in October 2012.

It examines in detail the results of the campaign up to that date, including how many workers had benefited from its adoption and the amounts of money involved.

Wills and Linneker found that the effect of the adoption of the Living Wage was to improve the stability, attitudes and characteristics of the workers doing the jobs. They quote one respondent who said “The more you pay people, the harder people work and the more dedicated they are to the job and you can achieve a higher rate of efficiency in cleaning by paying people more.”

The key findings of the study were:

• Over half of employees (54%) felt more positive about their workplace once the living wage was introduced. Staff leaving rates fell by a quarter.

• Wage cost increases associated with the living wage averaged 6%, despite low-paid staff receiving much higher increases than this in their hourly rate of pay (an average of 26%).

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.

Full report is at: www.geog.qmul.ac.uk/livingwage/pdf/Livingwagecostsandbenefits.pdf