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Office of the Deputy Prime Minister

Answer

Mr. Luff: To ask the Deputy Prime Minister for what reason the data used to calculate area cost adjustment includes pay data for the public sector; and if he will make it his policy to use only private sector pay rates in future calculations. [151129] Mr. Raynsford: The area cost adjustment (ACA) is the element of the funding formula which takes account of the different costs of labour and non domestic rates between areas. The labour cost element of the ACA is calculated using hourly wage data for both the public and private sector from the New Earnings Survey (NES). To use exclusively private sector pay in calculating the ACA would take little account of how any public sector employers, such as the NHS, affect pay in their local labour market. Private sector wages also vary more across the country than public sector wages because many public sector employees are paid according to national pay scales. To base the ACA on private sector wages alone would overstate the variability in staff costs for local authorities across the country. The Office of the Deputy Prime Minister recently reviewed the grant distribution system and introduced new formula from 2003-04. It was announced in the 2001 White Paper "Strong Local Leadership--Quality Public Services" (CM5237) that the funding formulae will be frozen for at least 2004-05 and 2005-06. The Office of the Deputy Prime Minister does not intend to change the way that the ACA is calculated during this period.

Secondary information

Type

Written question

Reference

417 c426-7W; 151129

Session

2003-04

Subjects

Local government Pay Local government finance Public sector

Link

View this Written question on www.publications.parliament.uk