Mr. Michael FosterTo ask the Deputy Prime Minister for what reasons he did not separate metropolitan areas in West Midlands when calculating area cost adjustment. [109361]
§ Mr. RaynsfordThe area cost adjustment is calculated using New Earnings Survey (NES) data. The data contain no information on the size of an area's resident population. Office for National Statistics uses national insurance numbers to select those who participate in the survey.
The NES does contain information on the area in which the survey respondent lives and in which they work. Information on the area in which the survey respondent works is used in the calculation of the area cost adjustment.
The area cost adjustment (ACA) has been calculated for each 1991 county in line with the recommendations of the independent Elliott review of the area cost adjustment. The exception to this rule is that the Office of the Deputy Prime Minister has further refined the 494W ACA geography around London, by acknowledging fringe and non-fringe areas in the counties which surround London, and by separating Greater London into four ACA areas.
The Office of the Deputy Prime Minister calculates the ACA for county areas because we wish to produce robust ACA factors that are stable over time. For individual authorities the NES sample size can be small and small samples can lead to volatility. In reforming the ACA the Office of the Deputy Prime Minister has had to strike a balance between more finely reflecting local labour market pressures, by calculating the ACA for smaller areas, and providing stable and robust ACA factors each year.