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Area Cost Adjustment

Volume 248: debated on Tuesday 25 October 1994

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To ask the Secretary of State for the Environment what assessment he has made of the soundness of data from the new earnings survey as the basis for area cost adjustment.

The New Earnings Survey is a well-established and comprehensive survey of earnings across the country. It is, therefore, a very suitable basis for establishing the relative wage rates paid in different regions in occupations relevant to local authorities. The sample numbers in the survey are, however, not large enough to produce reliable estimates of wage rates in individual local authorities. For this reason, the area cost adjustment is calculated at a regional level.

To ask the Secretary of State for the Environment what would be the effect on counties in the east midlands of removing £1·5 billion distributed through area cost adjustment to counties in the south east and dividing the proceeds to increase the general amount of the standard spending assessment of every other county and metropolitan authority outside the south east.

The table shows the effect on the standard spending assessments of counties in the. East Midlands, if SSAs in 1994–95 had been calculated without applying the area cost adjustment to authorities in London and the South East, but with no other change either to the national total of SSAs, or to the detailed formulae applied to each service.


1994–95 SSA

£ million
SSA with

no area cost


£ million
Change in SSA

£ million
* figures may not sum due to rounding to nearest pound million

To ask the Secretary of State for the Environment what plans he has to review the area cost adjustment element of standard spending assessment.

Various aspects of the area cost adjustment have been considered this year by the SSA sub-group, which is the main forum in which technical issues affecting standard spending assessments are discussed between government officials and local authority representatives. Ministers are considering the options which have been put forward and will be announcing their proposals for 1995–96 later in the year.