Income and Poverty

Poverty has not left east London, but it has changed

  • Published: Nov 03, 2015
  • Category: Income and Poverty

One of the big changes in this year’s London’s Poverty Profile is around the “good news” – falling numbers of people claiming out of work benefits, rising numbers of people in work, falling unemployment. This improvement is particularly evident in the inner east boroughs – Hackney, Tower Hamlets and Newham – which have also recently improved their rankings in the indices of multiple deprivation.

For anyone who has spent any time in Tower Hamlets (where NPI is based) or Hackney (where most of NPI’s staff live), it is obvious the areas have changed – new amenities and luxury flats, as well as stories of ‘social cleansing’ in the Balfron Estate in Poplar, and the New Era estate in Hoxton.

So are Tower Hamlets and Hackney becoming less deprived simply by importing better off people and pricing out the poor? Or have people on lower incomes benefited from this recent prosperity? Our report gives a few clues as to what has happened.

Firstly, let’s set out some basic numbers. The working age populations of Tower Hamlets and Hackney grew significantly in the last decade. From around 150,000 in 2004, Hackney grew by 30% to 190,000 ten years later. From the same starting point, Tower Hamlets grew by 40%, to 210,000. By way of comparison, the working age population of London grew by 15% over the same period.

So what has happened to the poverty indicators over that period? One place to start is with out of work benefits. The graph below shows the proportion of people claiming an out of work benefit in Hackney and Tower Hamlets over the last ten years. For comparison, it also has the rates for London and England. 

Out of work benefits in Hackney, Tower Hamlets, London and England

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The proportion of working age adults claiming an out of work benefit is lower pretty much everywhere now than it was a decade ago, but the falls in London are steeper than the falls in England as a whole. The falls in Hackney and Tower Hamlets are steeper still. So while the gap between Hackney and the England average was nine percentage points in 2005, it is now three. In Tower Hamlets the gap was six percentage points. It is now just one. At the same time, London moved from having a higher rate of benefit receipt than England as a whole to a slightly lower rate.

It is not just a falling rate we have seen in east London, though. The numbers have fallen in absolute terms, from 30,000 to 23,000 in Hackney, and from 26,000 to 21,000 in Tower Hamlets. So what difference has the growing population made? Given the high levels of claims in both boroughs a decade ago, it seems reasonable to assume that people moving in were less likely to be claiming than people already resident in the area.  23,000 people claiming benefits is 12% of the population in Hackney today, but 15% of the population in 2005, so this population change could account for up to three percentage points difference. In Tower Hamlets, the difference could be as much as four percentage points. But even with these falls in both the proportion and absolute numbers, Hackney and Tower Hamlets are still above the London average. Hackney still isn’t Kensington. Tower Hamlets still isn’t Wandsworth. 

So what happened to the people who were claiming benefits five years ago? Did they find work, or did they move out? This is a harder question to answer than it ought to be. There is little published data that actually tracks people over time, much of it, like the benefit data used above, is just a snapshot.

One source we can use is housing benefit data. The DWP have published data on housing benefit claimants who move address, showing where they move from and to. The graph below shows that data for 2014 – moves to and from Hackney and Tower Hamlets. 

Claimants of housing benefit moving to and from Hackney and Tower Hamlets

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In 2014, roughly the same number of housing benefit claimants moved to Hackney or Tower Hamlets from Inner London as moved in the opposite direction. Around 700 claimants moved to or from Hackney, around 400 moved to or from Tower Hamlets. The same is true for outer London, albeit on a smaller scale – around 350 claimants moved to or from Hackney, around 300 to or from Tower Hamlets. In fact slightly more moved to outer London from Tower Hamlets than in the other direction, but the difference was only 20 people.

There were more people moving out of London from the two boroughs than into London, but this is the difference between two small numbers. Around 180 moved out of each borough, and 100 moved in. The graph does not show people who moved address but stayed in the borough – by far the largest category, accounting for around 2,500 moves in both boroughs. So this data does not suggest that poor people are moving out of east London in huge numbers, or that many more are moving out than in. Rather, it looks like a churn of people, in and out of east London, criss-crossing the capital as they go.

The graph above only covers 2014, but the patterns were little different in previous years going back to 2010. It was expected that welfare reforms would vastly increase the outward flow of claimants from inner London. That is not what the figures show – yet. It may be that, so far, interim measures such as discretionary housing payments are stemming the outwards flow of families from inner London.

So is it just a simple story of east Londoners moving off benefits and into work? The number of Hackney residents in work is up 15,000 in the last three years, and 50,000 in the last ten. Tower Hamlets has seen even bigger rises – 20,000 since 2012, 60,000 in the last decade. These rises in employment are larger than the falls in out of work benefit claims – the growing population is contributing to the growing employment. However, one of the big stories of the report is that falling worklessness has been accompanied by growing in-work poverty.

We can get a decent proxy of in-work poverty at a borough level by looking at the housing benefit statistics. Housing benefit is paid to people who cannot afford their rent, whether in the private or social sector, whether in or out of work. For the last few years, it has been possible to split these figures by the employment status of the claimant. The series only goes back to 2011, but it’s pretty instructive. 

Housing benefit claims among working age households, in and out of work in Hackney and Tower Hamlets

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The total number of housing benefit claims in both boroughs is roughly the same as in 2011, having risen to 2013 and fallen since. But the composition has changed. In Hackney, the number of claims made by people in work rose from 10,000 to 13,500 in four years, and now makes up 40% of the total. In Tower Hamlets they rose from 8,000 to 12,000, and now make up 43% of all claims. The fall in out of work claims is pretty much entirely matched by a rise in claims among working people.

This suggests that previously workless people are now in work, but still needing support to pay housing costs. Other research backs this up – lone parent work rates in London have risen significantly in recent years, from 50% to 60% since 2010. The same number of lone parents are claiming housing benefit now as then, but a greater share are now in work. It seems unlikely that workless lone parents have moved out of London to be replaced by an equal number of working lone parents moving in. It is more likely that lone parents who were previously not in work are now working.

In summary, then, the population of east London is, on average, less deprived than it was a few years ago. This is for a few different reasons. The huge number of people moving in to east London has “diluted” the level of disadvantage, as the newcomers were more likely to be in work than the resident population. Some lower income families have moved out, in extreme cases some have been made homeless and placed outside of the borough they were living in.

Some residents of the borough who were previously not working have found paid employment. But too often this paid work still leaves people needing support to pay their rent. A combination of low earnings and high rents means that poverty hasn’t left east London, it’s just increasingly found among working families. 


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