Workers Step Up Fight against Inadequate London Weighting

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Workers Step Up Fight against Inadequate London Weighting

CWU Press Statement london Weighting

Evidence submitted by UNISON to the Greater London Authority Advisory Panel on London Weighting

Report by the Greater London Authority London Weighting Advisory Panel

Postal workers in London are striking today, Wednesday, in defence of the right to have the London weighting paid at a level in accordance with the cost of living in the capital. This is effectively a struggle against the pressure from capital to drive down their standard of living. It is thus a just economic struggle being fought in the context of the workers’ right to a livelihood, a struggle which the workers have no choice but to engage in to retain any sense of dignity.

The Communication Workers Union, which represents 28,000 postal workers in the capital, will press for more strikes if the workers’ demands are not met.

And on October 16, local government workers at London's 32 town halls will be on strike. The 56,000 workers are members of UNISON, the largest local government union.

More action will follow as workers take action in support of their demand for the £4,000 weighting reflecting the extra cost of living in the capital. Julia Coleman, UNISON's head of local government in London, said further one-day strikes and selective action was being considered to resolve the dispute, which dates from May last year.

Julia Coleman said: "Looking at November and running into the Christmas period, we will be seriously looking at [action in] schools. We are also looking at those financial areas that bring revenue into councils. And we will be looking at the very basic support to councils that keeps everything ticking, such as mail rooms and switchboards."

Town hall staff now get up to £2,850 a year London weighting. Lecturers get £2,134, while postal workers get up to £3,281.

Bill Knight, leading a London Assembly investigation, said that the £4,000 demand is "in the ballpark" of how much public sector workers should receive for inner London because they receive nine per cent less in wages than private sector employees. He told the London Evening Standard that in real terms it is better to work in Sheffield or Salisbury than in London.

Introduction

Last week, CWU London members voted overwhelmingly in favour of strike action in support of the union's outstanding claim for a £4,000pa London Weighting allowance.

In the light of members' clear decision to back industrial action, the union's Postal Executive met on Monday and agreed in principle to respect their decision and sanction strike action in furtherance of our claim.

We have called this press conference today to spell out our case and announce the date for a 1-day strike across the capital on Wednesday 1 October 2003.

The case for London

The spiralling costs of living and working in the capital have intensified the cost pressures on our 30,000 London members who are already struggling to cope with chronic levels of low pay. These cost pressures have been recognised by the GLA and the Government who are offering additional financial assistance to key public sector workers (most of whom are on much higher basic rates of pay than postal workers).

Our case for a significant increase in LW reflects the sharp increases in living costs in areas like housing and transport:

House prices in Greater London have doubled over the past 5 years

In the last year, house price inflation was 18% - bringing the average property price to £206,425.

The average cost of property bought by first-time buyers in London is £175,220. This means a single person would normally have to be earning over £58,000 a year to get a mortgage.

London workers commute for twice as long as the rest of the UK

The average commuter time for London workers is 110 minutes a day - that's equivalent to an extra day's overtime every working week.

Aside from the high cost of tube travel, London is the only UK city with a vehicle congestion charge - that can add £30 a week to employee's costs.

The cost of water rates and council tax for a 3-bed terraced house in Greater London is 38% higher than the UK average

Childcare costs 30% more in London

Figures from the Daycare Trust found that the typical weekly cost of nursery care in the UK is £120, but this rises to £149 in inner London.

Comparability

The current London Weighting allowance for postal workers (£3,282pa inner/£2038 outer) is below the London average (£3,290) and well below that currently paid to other comparable public sector groups like the police (£6,165), teachers (£3,927), and prison officers (£3,800).

We recognise Royal Mail have made a move on London Weighting, but its not enough to restore the ground we've lost over recent years as prices and costs have rocketed. Even with a £300 pa increase, postal workers will still receive a lower London Weighting than the public sector groups listed above.

According to a survey by the Reward Group, the actual difference in costs between London and the rest of the UK is £4,418 for inner London and £3,272 for outer London.

Royal Mail's proposed offer of £3,784 includes consolidation of existing recruitment and retention payments (worth around £200 per annum in inner London).

Conclusion

Clearly strike action is a measure of last resort. We hope Royal Mail will take note of our members' democratic decision and re-enter talks on resolving our outstanding claim.

Next week's action will demonstrate the strength of feeling on this issue and hopefully convince Royal Mail of the need to respond positively to our case for a substantial increase.

24 September 2003

RESEARCH February 2002

Summary & Conclusions

In evidence submitted by UNISON to the GLA, recommendations were made for the continuation of a 'distinct London allowance' separate from basic earnings for all public service workers. The report was presented against the backdrop of employers' calls for selective allowances for specific groups of workers they believe are hard to recruit. UNISON argued the allowance should be extended to all workers involved in pubic service delivery - including those working in the voluntary sector - through fair employment clauses. The GLA had recently introduced such a clause into its contracts. The level of London Weighting, which has not been reviewed properly since the 1970s, affirms the need for a full review is now well overdue.

1. Only a very significant uplift in pay can deal with the recruitment and retention problems that bedevil all parts of the public sector in London.

UNISON would welcome an opportunity to work with employers in partnership to address these problems in the long-term, in an equitable and systematic way.

2. UNISON favours the retention of a distinct London Allowance which is expressed separately from basic pay, rather than the application of additional points or grades awarded for recruitment and retention purposes which are not transparent and tend to distort grading structures.

3. It is important that the principle of equity contained in the 1974 Pay Board Report is retained and London Allowances are paid on an across-the-board basis to all categories of staff, rather than targeted to particular groups, or paid on a different basis.

4. Within particular employing groups in the public sector eg NHS, Local Government, Higher Education, there should be a uniform rate across London. Since the 1974 report, the rationale for different rates for inner and outer London has diminished. Costs, particularly for housing are no longer significantly different in inner and outer and in any case any cost difference is offset by longer commuting times, increased fares and a transport system which is a shambles.

5. For those working in public services who do not receive any extra pay for working in London, UNISON would like to see other employers follow the lead of the GLA in applying fair employment clauses.

6. UNISON would welcome the reestablishment of an updated Pay Board London Weighting Index, which takes into account in a realistic way the additional costs (particularly of housing), wear and tear, and the earnings differential of comparable jobs inside and outside London. This should be updated on a regular basis, to take into account changing patterns in spending and for example, the proportion of income required for housing. This could then be used as an authoritative indicator to inform pay negotiations.

7. However, this would need to be looked at in conjunction with other policies to reduce the stress of living and working in London, particularly through the implementation of a coherent transport policy and affordable housing to be made available to more than a small group of key workers.

Evidence to the Greater London Authority Review of London Weighting

UNISON members

UNISON is the largest trade union in Greater London. It represents 135,000 public service workers, either directly employed or working for a contractor.

The majority of members (64%) work for Local Government, including the voluntary sector, with a further 26% working for the Health Service. The remainder work in the non-teaching grades at London's Higher Education institutions, or in the now-privatised energy or transport companies.

UNISON's membership is predominantly female (63%), with large numbers being part-time workers. UNISON represents staff in most occupational categories right up to senior management and chief executive level.

London Weighting paid in the public sector
There are a number of different weightings paid to public sector staff and the number is increasing.

Some of the differences are based on geography; both the NHS and Local Government pay different rates for inner and outer London. Within Higher Education 'old' Universities froze London Weighting at £2134 in 1992, whilst the 'new' Universities have tended to increase in line with the national pay settlement.

The Pay Board in 1974 recommended that London Weighting was "based on considerations of equity" and therefore was "an across the board payment". Since then, little has been done to achieve this with rates being paid according to grade, geographical location or type of occupation. For example, at the Imperial College of Science, Technology and Medicine, at merger, it was paying eight different London Weighting allowances, to academics, non-teaching staff, clinical teaching staff, doctors and technicians.

In an attempt to re-introduce the London Weighting as an equitable payment, UNISON, alongside the other Local Government unions has submitted recently a claim of £4,000 to be paid to all staff working for the London Boroughs. The management side of the Greater London Provincial Council has rejected this claim. They have argued that they could not afford the £250m cost of implementation and, in fact, do not accept the principle of London Weighting being an equitable payment. They would prefer to target pay supplements at those they regard as 'key' workers. UNISON has made it clear it rejects the 'key' worker concept as being divisive.

Recruitment and Retention
It is recognised that many employers in London do not just rely on 'London Weighting' to pay staff extra compared to workers elsewhere in the UK. In order to recruit and retain staff, across the public sector, paying higher grades or extra salary points is common. The 1997 Dearing Report 'National Committee of Inquiry into Higher Education' acknowledged this fact.

In fact, the government has recently gone further than this with the introduction of the Cost of Living Supplement for nurses in the 2001 pay award. The standard rate for London Weighting was increased by 3.7% to £2,365 p.a. in inner London, and £1,684 in outer London. On top of this a further allowance of 5% of salary up to a maximum of £750 in both inner and outer London was awarded. Further, for qualified nurses, a Cost of Living Supplement was introduced. This is paid at 4% of basic salary (excluding London Weighting) and ranges between £600 and £1000.

A qualified G grade nurse, at the bottom of the scale would therefore receive an additional £1,750 on top of £2,365 inner London Weighting.

Whilst UNISON recognises the recruitment and retention problems of nurses in London, this approach does cause a number of concerns. Firstly, in terms of equity, it moves further away from the original idea about London Weighting being an across-the-board payment. Non-qualified nurses are particularly aggrieved at being excluded from these top-up awards. Are their housing costs and travel to work difficulties any different to those of a qualified nurse?

Also, the delivery of healthcare in the NHS is essentially a team approach. Patients arrive in theatre because of a porter; medical records are kept in order by an administrator etc. Whilst extra payments for nurses may go some way to alleviating recruitment problems in London, ignoring the rest of the health workforce will only lead to future problems elsewhere in the NHS.

The other problem identified by UNISON with regards to targeted London supplements is around the issue of equality. What is to stop a non-nurse member of NHS staff taking a case for equal pay for equal value against an NHS employer?

Despite attempts to use various London supplements to address recruitment and retention issues, it can still be argued that London workers do not earn enough to have a comparative lifestyle to their 'country cousins'. The Reward Surveys report (September 2001) looked at the average salary of a middle manager in each region, as well as, the average cost of living for each region. It showed that the Greater London cost of living was 32.2% above the national average, whilst the middle managers' pay was 12.5% above the national average. Thus, their Quality of Life index for Greater London was -19.7%. The only other region to score a minus rating was the South East with -16.4%.

The Lack of London Weighting
For increasingly large parts of the public sector workforce their employer is no longer the local authority, the NHS or the local University but a contractor.

Research funded by The East London Communities Organisation (TELCO) and UNISON shows that the majority of contractor staff are not covered by TUPE (Transfer of Undertakings, Protection of Employment). Whilst the staff that were transferred to the contractor are protected, employers bring in new staff on less favourable terms and conditions. One of the major differences between staff is often London Weighting.

In fact, the non-TUPE staffs frequently fail to receive many of the elements associated with a normal pay packet, including sick pay or a pension scheme. They may work but are essentially an underclass within the workforce. The Family Budget Unit calculated that a family of two parents, one working full-time and one part-time, with two children would need to earn £322 per week to live without means-tested benefits. It was calculated that £6.30 per hour was the pay rate necessary to give these families a 'low but acceptable' income.
The TELCO report found examples of cleaners working a 40 hour week plus 15 hours overtime to earn £226.50. Not only are these wages too low for a decent living, the social impact, particularly on children, of parents working so long cannot be underestimated.

Whilst any increase in London Weighting would be welcomed by UNISON, it is vital to acknowledge that large parts of the London workforce would not benefit from such an increase. The GLA's commitment towards fair employment clauses in contracts awarded by the Authority may go some way to getting around this. Dave Prentis, UNISON's General Secretary has called on "other public authorities to follow the GLA's example".

The TELCO report also identified high turnover as a major problem amongst contractor staff - both for the morale of the staff themselves and the delivery of a quality service. The study by the Joseph Rowntree Foundation 'Recruiting and retaining employees in low-paid labour markets' (January 2001) found firms with "the lowest pay levels … had the highest turnover rates". However, it concluded that firms are prepared to tolerate this because "lower turnover costs don't fully offset the increased wage costs" if they pay higher wages.

UNISON believes that private contractors will continue to keep wages low in London and 'put up' with the inconvenience of high turnover and low morale in the drive to maximise profits. However, if quality public services are to be delivered in London a well-paid workforce is essential. Either the return of contractor staff to public sector employment or the enforcement of fair employment contracts would alter the incomes of these workers for the better.

Housing costs
The most significant factor in the increase of living costs in London in the past three years has been the substantial increase in house prices. According to the National Housing Federation, an income of £40,000 is needed to buy a house with a 95% mortgage, in 28 of London's boroughs. Only in Barking and Dagenham would a £30,000 income be enough. In terms of seeing London as a single labour market, housing costs show that the problems faced are the same across Greater London.

Land Registry figures for the first quarter of 2001 show that the average price gap of a London house is £85,867 compared to the England and Wales average. This is equivalent to an extra £5,400 per annum in mortgage payments at 6.25% mortgage rates - a figure far in excess of London Weighting payments.

UNISON has welcomed the government's £250m investment in starter homes for public sector workers. However, the scheme is inadequate in terms of its size and is only aimed at certain 'key' workers. As previously mentioned, UNISON does not believe the 'key' worker concept is helpful.

The Joseph Rowntree report 'Characteristics of the current housing boom' (October 2000) shows that the average first-time buyer deposit was £28,000 in London. At 20% of house purchase costs it is at the highest level for 20 years.

Whilst, London Weighting increases would go some small way to assisting people with applying for or paying a mortgage, UNISON believes that London has to face up to its housing shortage in a more fundamental way. With the lowest percentage housing stock increase in the country and a decreasing rental sector, ways must be found to increase the amount affordable housing stock for public sector workers.

Fact file: Real wages required: the cost of living in London

1. A three bedroom flat in London costs more than anywhere else in the world
2. The average price paid for a home by a first-time buyer in London was £120,000. A £38,000 salary would be required by a single person to pay the mortgage
3. The London Chamber of Commerce estimate 65,000 will leave London over the next 10 years due to the cost of living
4. The vast majority of public service workers are not counted as keyworkers
5. At £4.10 The minimum wage represents 38% of average earnings
6. Compared with other regions workers in London spend 6 hours extra travelling to and from work
7. Childcare costs in London are £20.00 above the national average of £88.00
8. Recruitment and retention problems exist in most of London’s public services

· Summary of the Report

LW was last reviewed by the Pay Board in 1974. It distinguished between Inner and Outer London and calculated it in an after-tax basis as a "direct cost compensation".

Some of the main findings are that -

· There are increasing difficulties in the recruitment and retention of public sector workers.

· Increased pay would help to solve these problems.

· Pay bargaining has become more decentralised with huge differentials in LW between different sectors.

· The complexity of calculating the additional expense of working and/or living in London has proved too much for this decentralised approach.

· LW in the public sector should be set by private sector comparison and the appropriate percentage of the total pay bill set by for the allowance. Some occupations would require more than others.

· Flat rate payments should be the preferred method, protecting the lower paid, but in some cases percentage payments should be made to retain staff who would otherwise leave for better paid jobs outside London.

· Boundaries on Inner, Outer or uniform rates of LW should be the matter of agreement between employers and employees.

· Other benefits such as free travel should be considered.

Key Issues

Cost compensation and retention are inextricably linked. People will stay in jobs if they think they are being adequately paid. The problem of working out the differential costs between London and everywhere else is that LW is paid to people who work in London, not to those who live here. Also, there are many advantages of working in London such as the abundance of amenities. Any attempt to quantify all aspects of differences between working in London and elsewhere would be arbitrary and unreliable

LW in the public sector should be set by comparison with the private sector as a comparable proportion of pay. There is no reason why LW should be proportionately different in the public sector, even though the factors are different from the private sector; the latter is driven by market forces, the former is more subject to political considerations such as levels of service and taxation. Some public sector employers said they would need extra government funding to pay increased levels of LW.

A London Premium should not be seen as the same as London Weighting: the premium would be for recruitment and retention purposes and LW for cost compensation.

Recommended method of calculation for LW:

1. Select the percentage rate applicable for the area. Using the "all occupations" rate will give 36-37% for Inner London and 11-15% for Outer London.

2. Apply the percentage rate to the total pay bill for the employees in that area (Inner or Outer, excluding any London Premium).

3. Divide the result among the employees according to the agreed method (flat/percentage) with no reduction in the Premium.

LW should not be used to solve the problem of low pay. The problems of travel and affordable housing are not the subject of this report.

Background to London Weighting

London is the most expensive city in the EU and the fifth most expensive in the world. (World Wide Cost of Living Survey, Economist Intelligence Unit, 2001)

LW dates back to the 1920s and was pioneered by the Civil Service. Many employers, private and public, paid it prior to 1950. In 1967 the National Board for Prices and Incomes completed a review of LW and in 1974 the Pay Board standardised LW in the public sector. The main components in the Pay Board review were: housing, travel to work, "wear and tear" and other consumer expenditure.

The government continued to publish annual indices until 1982. The independent research organisation Incomes Data Services continued to calculate the index until 1987, when it decided the 1974 parameters needed overhauling. The Labour Research Department continues calculating indices, but recognises the inadequacies of the data.

Boundaries

The report considers "London" to mean the 32 boroughs of the former GLC, now the GLA boundaries, including the City. Inner London is considered to be four miles from Charing Cross. Outer London is the area out to the London boroughs' boundaries. There are many variations on these boundaries between employers, which spread outside London, overlap and have no logical consistency. Differentials in Premium payments between teachers and police also gave rise to concern. There was Trade Union and employee support for abolishing the distinction between Inner and Outer London allowances.

Pay setting in the public sector

This has been decentralised. In 1974 the Pay Board's recommendations were given effect across the public sector; this is of course no longer the case. There are many more independent pay review bodies. One effect of the increases in LW for the Metropolitan Police was to suck in police from the surrounding forces (Essex, Herts, Kent, Surrey and Thames Valley) where an allowance of £2,000 per annum was introduced. Health workers, fire fighters and teachers in London have also had increases for retention and recruitment reasons. Transport for London also provides a subsidy of £4.00 per shift for drivers and conductors in London. Railtrack pays a Premium for recruitment and retention. The picture is one of fragmentation and lack of consistency. But this might not matter.

Standards of Living in London

A Centre for Economics and Business Research states that the difference in the standard of living between London and the rest of the UK. Average earnings in London were 30% higher in 2000. Adjustment for the mix of occupations brings this down to 24-26%. Taking into account tax and national insurance the London differential is reduced 30% to 27% (average) and 24-26% to 21-23% (adjusted).

The CEBR estimates that a London basket of goods is 13% higher priced than elsewhere in the UK. Overall London prices for goods and services are between 8.5 and 9.3 per cent higher. Some services such as decorators, plumbers and electricians are 58.5% higher and hairdressers are 32.2% higher. It also estimates that housing costs mean that most people are better off working outside London. There are more people living in flats and maisonettes in London than in the rest of the UK (40%/15%). The average price of a house in London is now £200,000.

Some Facts & Figures

Differentials in London Premia

New Earnings Survey
	Public Sector	Private Sector	Private Sector (not City)
Central London	26%	41%	37%
Inner London	24%	37%	33%
Outer London	15%	11%	11%
Greater London	20%	25%	22%
Labour Force Survey
Central London	26%	44%
Inner London	23%	36%
Outer London	13%	15%
Greater London	19%	27%

Current top London Weightings (from LRD, June 2002)

Employer	Amount	Area Covered
Inner London	£
Audit Commission	4654	Up to 5 miles from Charing Cross
Astra Zeneca	4251	Central London
HSBC	4000	Up to 3 miles from Charing Cross
NCM Credit Insurance	3939	City of London
Centrica BGS	3800 Chelsea/Westminster	Central Dulwich
BT	2600	Inner London
Outer London
Audit Commission	2932	10-18 miles from Charing Cross
Centrica BGS	2850	out to M25
Nationwide Building Society	2700	3 to 6 miles from Charing Cross
NHS	2522
BG plc Transco	2502	4-16 miles from Charing Cross
BT	1128	Outer London

Source: Communication Workers Union, London Citywest Branch, http://www.cwucitywest.org.uk/lweighting.html