If we do our job properly, our report should help those who negotiate pay to set a fair London Premium

Bill Knight

"House prices in the capital have risen by nearly 120% since 1995 and the cost of renting can be even more expensive than buying."

He added: "This makes it very difficult for many low paid yet essential workers to make ends meet.

"We will be arguing their case during the review period and continuing to campaign for fairness for all London workers."

Research carried out by the T&G found that the average house price in London has risen from �98,276 in 1995 to �205,387 now.

Compared to other parts of the UK, the average price of a flat in London is more expensive than a detached house in the North and Midlands.

'Long overdue'

The inquiry will be chaired by Bill Knight, former chair of the Law Society's Company Law Committee.

Geoffrey Roberts, who co-wrote the 1974 Pay Board Report on London Weighting, will act as adviser.

The report is expected to be published in the summer and will be sent to the government, employers, trade unions and anyone who negotiates pay packages.

Mr Knight said the review was "long overdue".

"Many people say they can no longer afford to live in the capital and this is a really big problem affecting recruitment and retention of staff in some areas of London.

"We want our report, which will be completed next summer, to be genuinely useful to decision-makers.

He added: "If we do our job properly, our report should help those who negotiate pay to set a fair London Premium."

The Greater London Assembly said it hoped the inquiry would be able to lay the foundations for a "fairer deal" for all workers.

A spokeswoman added: "Essential services in London are haemorrhaging workers because staff are being priced out of the capital."

There has been no single body in overall control of enforcing the London Weighting allowance since the 1970s when the now disbanded London Pay Board had responsibility for it.