Income and Poverty

What are the drivers of poverty in London today?

  • Published: Nov 13, 2017
  • Author: Carla Ayrton
  • Category: Income and Poverty

The most recent London’s Poverty Profile is the latest in a report series which look at the patterns of poverty and disadvantage in London (the data is available here). These patterns haven been shaped by the events of the last ten years – the financial crisis, the recession and the programme of austerity from 2010 onwards. At the same time, London’s population has grown substantially – by 845,000 since the first report was published in 2009.

On some measures London is now better off than it was before the financial crisis. Employment rates are as high as they have ever been on existing data and the proportion of households where no one of working age is unemployed is at a record low. Despite the growth in population, the number of unemployed men and women is at a ten year low.

Partly as a result of these trends, the proportion of people in poverty in London has drifted downward since the three years to 2010/11 from 29% to 27%. In contrast, however, the proportion of people in deep poverty – whose income is below 50% of the median – has risen by 1.5 percentage points over this period.

The three big trends that explain the recent story of poverty in London – namely a narrowing but deepening of poverty, and the still high levels compared to the rest of the country – are around work, housing and the social security system.

London’s strong employment rate performance is part of the explanation for declining overall poverty rates. However, the level and type of employment created hasn’t been sufficient to substantially reduce overall levels of poverty. 58% of people in poverty are in a working family, compared with 44% a decade earlier. The proportion of all people in working families in London in poverty has risen from 17% to 21% over the decade. Although the proportion of employees in London paid below the London Living Wage fell slightly in 2016 to 21%, this is still above the levels of ten years ago. Added to this many Londoners are in insecure work or are underemployed, working fewer hours than they need or would like. Tackling low pay and insecure work and making sure that people can progress into secure and well paid employment is key to solving poverty in London.

The second key dimension to poverty in London is housing. After accounting for the cost of housing London’s poverty rate almost doubles, rising from the same level as the rest of England to much higher. Some of the indicators in this year’s London’s Poverty Profile point to those at the sharp end of London’s housing problems. The most recent year of data 2015/16, has at least seen no increase in rough sleeping while homelessness acceptances began to decline after consistent increases since 2009/10.  Even so rough sleeping and homelessness acceptances in London are still significantly higher than a few years ago, despite record employment levels. Rents are high and have increased in the last number of years, while provision of affordable housing in London continues to fall far short of targets.

People in poverty in London increasingly live in the private rented sector – 43% do, compared with 36% five years ago. In the last decade there has been a corresponding increase in the number of children in poverty living in the private rented sector, with this number roughly tripling.

Living in the private rented sector comes with difficulties, especially for families with children. The insecurity is widespread, with many contracts lasting only six or 12 months.[1] Conditions are poorer than in other types of tenure and the private rented sector is more overcrowded than 10 years ago.

The third dimension is the changes to the social security system. Over the past seven years, the government has removed some of the support in place to help people cope with the high housing costs in London. Reductions in Local Housing Allowance (housing benefit for the private rented sector), localisation of council tax support and the introduction of the benefit cap and bedroom tax have all made it harder for those on a low incomes in London to survive. At the same time benefits have been frozen until 2020.

Although the government has not announced any new welfare cuts, those announced in the previous parliaments are still being implemented and their effects have not yet been fully felt. Some of these are built into Universal Credit which will be felt as this is rolled-out across London. These changes certainly partly explain why deep poverty has risen and unless the role out of Universal Credit is stopped or changes are made, the proportion of people in deep poverty in London will continue to rise.

Although unemployment is at a record low, still 27% of Londoners are living in poverty. Access to secure jobs which pay the London Living Wage[2], decent and affordable housing and a real safety net for those unable to earn enough are necessary to reduce poverty in London. The record of the last seven years suggest this cannot be left up to central government alone.  

 

 

 

 



[1] Shelter (2017) Unsettled and insecure: The toll insecure private renting is taking on English families. London: Shelter.

[2]  Set at £9.75 per hour until November the 6th 2017 when the London Living Wage increased to £10.20 per hour.


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