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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 excludes overtime pay data; and if he will make it his policy to include such data in future calculations. [151130] 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 excluding overtime from the New Earnings Survey (NES). The NES is a snapshot of the wages people earn in a given week in April each year. In calculating the ACA the Office of the Deputy Prime Minister need to be able to compare wage costs in different areas on a consistent basis. This is why the Office of the Deputy Prime Minister looks at hourly rather than weekly wages, and why the wage data used is only taken from those on adult pay rates, whose weekly wage has not been affected by absence and excludes overtime. The availability of overtime to individual workers is erratic. Because the NES is a snapshot, it is impossible to tell whether an individual is working overtime as a routine part of their job, or because a colleague is sick and the firm needs cover. And overtime payments often depend on the time and day overtime is worked. All of which diminishes our ability to compare labour costs between areas on a like for like basis. The Office of the Deputy Prime Minister 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 c427W; 151130

Session

2003-04

Subjects

Local government Pay Local government finance Public sector

Link

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