I'll bet Harry is a great laugh on layovers...
Yes, if you never leave the hotel you can save money from your allowance and as Harry says it is really only to cover the cost of keeping body and soul together on the layover. But if you want to go outside of the hotel to eat, forget it. Some people might want to do a bit more on the layover than go to the supermarket and eat in the hotel every time and it should be possible to feed yourself outside the hotel without going over the allowance or restricting yourself to McDonalds.
As an example, because London has already been mentioned, lets say you pop into the big smoke and fancy some lunch. Garfunkel's, which is pretty mid range, will cost you £24 for soup, steak and chips, Pepsi and a coffee. That is half your allowance gone on one meal and steak and chips with a Pepsi is hardly expensive tastes.
Like I said, unless you fancy a lot of Delsey Dining, inadequate.