Taskforce tackles cost of capital life

Ken Livingstone is to set up a "Living Wage Unit" at City Hall to monitor the soaring cost of living in London.

The Mayor agreed to create the unit after research showed that people put high prices as the worst thing about the capital.

It comes as concern mounts over the pay of ordinary workers - which has grown slightly ahead of inflation in the past decade - compared with that of directors, whose salaries have soared by 288 per cent. The record divide has raised fears of a collapse in staff morale and could hit productivity, especially in London where the gap is most pronounced.

The unit will calculate the hourly living wage needed to survive in London and announce and promote the figure every year. Mr Livingstone believes the wage should be set at ?7.70 an hour, well above the national minimum wage of ?4.85. He agrees with economists who say the national rate is way below what is needed for London.

The Greater London Authority will set an example by insisting that all its 47,000 contract staff are paid the hourly rate as a minimum condition of employment. The GLA is responsible for thousands of lowpaid cleaners on the Tube and in police stations but at present only insists on a "fair wages" policy for a small number of cleaning and catering staff who work at City Hall. Cleaners at the Mayor's HQ are among the best paid in the country, earning ?7.20 an hour.

The unit will also monitor prices for consumers to check whether they are being ripped off by retailers. In a monthly snapshot of prices, it is possible that the most expensive shops could be named and shamed, while some of the cheapest could be highlighted.

A survey this summer showed London had leapt from 10th to sixth in the league table of the world's most expensive cities. A recent Mori poll found that Londoners believe the cost of living has overtaken traffic jams and crime as the city's worst problem.

The idea of a Living Wage Unit comes from the US. The mayors of Boston, Los Angeles and Chicago all insist on a specific rate from their contractors and subcontractors that is double the American minimum wage.

Mr Livingstone agreed to the project after pressure from London Citizens, an alliance of faith groups and trade unions that has long campaigned against poverty pay. Although some firms are resistant to the idea of being told what to pay their staff, campaigners hailed a breakthrough this year when Barclays and HSBC at Canary Wharf agreed to pay cleaners about ?6 an hour with extra holidays and pension rights.

A regionally-variable minimum wage is Liberal Democrat policy but the Government is opposed. The Department for Trade and Industry says it would be too complicated for employers to deal with varying rates in each region.