A Minimum London Weighting - a revised and updated approach

Matt Padley, Associate Director of the Centre for Research in Social Policy (CRSP) at Loughborough University, has updated analysis released in 2016 on London Weighting. The new report, funded by Trust for London, builds on the earlier analysis and puts forward an updated basis for calculating a minimum London Weighting using ongoing research on a Minimum Income Standard (MIS) for the capital.

The report looks first at existing London Weighting levels, before outlining the calculation of a minimum London Weighting. We go on to highlight some critical questions relating to London Weighting, including the consequences of changes to working patterns resulting from Covid-19 and how place-specific pay fits in with public, policy and political discussions of ‘levelling up’. The report concludes with recommendations and suggested next steps.

Key findings

  • Many public and private employers pay their employees more in London than they do in other locations in the UK. This wage supplement is often referred to as the London Weighting or the London Allowance.
  • At present, there is no systematic or agreed approach to calculating this weighting or allowance, with significant variation across employers and sectors.
  • An annually updated figure, rooted in public consensus about minimum needs in London would provide an important reference point for employers, unions, policy makers and beyond.
  • A previous report in 20161 highlighted the value of a London Weighting based on the costs of a minimum, decent standard of living in the capital compared to elsewhere in the UK.
  • The Minimum Income Standard (MIS) for London research – which began in 2015 – shows that households in London have much higher costs, particularly in relation to housing, childcare and public transport2 . • The ongoing MIS research can be used as the basis for estimating what the minimum London Weighting should be, and updating this on an annual basis.
  • A minimum London Weighting should not just help those on low pay in the capital, but should also support low- to middle-income workers in London towards reaching a minimum living standard (those earning up to £40,000 per annum, including minimum London Weighting).
  • Higher paid workers are more likely to be able to reach a decent living standard without a minimum London Weighting than those on lower pay.
  • Based on updated analysis, a minimum London Weighting needs to be £9,600 in Inner London and £6,549 in Outer London to cover the additional costs of a minimum living standard.
  • It is the recommendation here that the minimum London Weighting be set at the Outer London level – £6,549 – as this represents the minimum

30 May 2022