London Weighting - LPU Briefing

Introduction

During the 90s, London allowances in the private sector were largely frozen or only rose in line with inflation, so allowances across both public and private sectors increased relatively little in that decade.

When the Pay Board examined LW in the 70s, they concluded that if LW were to be based on principles of EQUITY – so ALL working Londoners could be put on a par with those employed in other regions – it was essential for LW to be an across-the-board, flat-rate payment.

Yet, since then, the use of additional market supplements for certain staff in areas of current shortage has been expanding – even where nationally agreed pay scales are used. This has created a highly selective new form of London allowance.

Evidence given to the Pay Board by the GLC in the 70s identified labour shortages for architects, firemen, and public health inspectors. The GLC argued that special payments should be made to overcome these shortages. The Pay Board concluded however that any ‘special payments’ would disturb a whole series of internal relativities agreed as part of the collective bargaining process.

Now, in areas such as IT, the same argument about special payments is made. The result is that it is often those Workers in occupations which are already well-paid who get the benefit, whilst the additional costs of London living fall equally on all workers.

And if LW were to be based on what can be short-term labour scarcity, during leaner times or periods of increased unemployment, these shortages can disappear – and with them the salary weighting, even though cost differentials will almost certainly still exist.

There is also a growing gap between pay for workers in the London public sector. The Panel needs to determine why this practice is growing in frequency and complexity, and who is monitoring these ad hoc arrangements.

• For example, for junior positions in Customs and Excise, LW is £615. For certain Police ranks it now over £6000.

The Unit’s research has revealed the complexities in the current system, and the fact that given these intricacies the principle of ‘one size fits all’ has declined. Now, both the issue of cost compensation and the issues of recruitment and retention – in both the public and private sectors – need to be addressed.

For the LW system to maintain the principle of equity, there is a need to develop appropriate protection for workers - the low-paid especially - who are not covered by national agreements. ALL low-paid workers in the Capital share an interest in the gap between their rates of pay and the basic incomes needed to avoid poverty.

No initiative on LW should exacerbate inequalities in an already unequal Capital.

FACTS:

• Although average annual earnings in London are over £29,000, 53% of London workers earn less than £24,000 and 32% earn less than £18,000.
• Household expenditure on housing costs is greater for people living in London than for any other region.
• House prices were 79% above the national average at the end of 2000.
• 56% of families and people living alone in Greater London are unable to get on the housing ladder.
• LW makes up a greater proportion of average female earnings in London than for male earnings.

Low Pay Unit December 2000