Income and Poverty

The other side of London’s success

  • Published: Oct 26, 2015
  • Author: Adam Tinson
  • Category: Income and Poverty

Last week’s London’s Poverty Profile shows poverty continuing to change in London, with growing in-work poverty and housing stress, even with a labour market recovery.

London is, at the same time, both an affluent and a poor city. It is home to very high incomes and great wealth, but also has the highest poverty rates of anywhere in the UK. Driven in part by high housing costs, 27%of Londoners are in poverty, compared to 20% in the rest of England. It also features great inequalities, with the wealth of the 90th percentile 173 times higher than that of the 10th percentile, a ratio nearly three times as high as that of the rest of England. Our London’s Poverty Profile report for the Trust for London catalogues how poverty and deprivation in London have been changing.

This is in some ways the first post-recession report, and many of the indicators reflect that, with rapidly falling worklessness and out-of-work benefit receipt. London’s population is also growing quickly, generally a sign of success for a city. But the nature of the work is increasingly insufficient to meet people’s needs, while housing problems remain at the centre of the poverty story in London.

First, the good news. The number of unemployed people in London is at its lowest level since 2008, with the proportion of people unemployed also well down on the levels experienced during the recession, as can be seen on the left-hand chart below. Underemployment has also fallen, driven by the fall in unemployment. The proportion of people aged 16-24 in London who are unemployed has fallen sharply between 2013 and 2014, by almost four percentage points. In fact, young adult unemployment in London is the same as in the rest of England, which is a change from the 1990s and much of the 2000s when it tended to be higher. 

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The number of people relying on out-of-work benefits has also fallen sharply since the recession, now at 9% of the working-age population compared to 12% in 2009, mainly driven by falls in jobseekers and lone parents.

However, the strong growth in employment and fall in unemployment has a flip side, as the right-hand side chart indicates. Over the last decade, the number of people in poverty in a working family has risen by 70% or 500,000. Nearly one in five jobs in London are paid below the London Living Wage, a figure that has increased for each of the last five years. There are other concerns around employment quality, such as the 35% of people with temporary contracts were unable to find a permanent job, ten percentage points higher than before the recession. The labour market also continues to be a more difficult place for certain groups, such as disabled people or ethnic minorities, who are more likely to be workless or low paid.

Housing is central to London’s poverty, in recent years driven by the private rented sector. There are now more private renters in poverty in London than either owners or social renters. The cost of private renting in London is double that of the rest of England, with the gap widening in the last five years. Social rents are also higher, but less dramatically so.

These high costs lead to acute problems. Firstly, London has more evictions, with 14 possession orders for every thousand renting households compared to seven in the rest of England. It also means more overcrowding, with 250,000 overcrowded households, or 8% of the total. This is more than double the West Midlands at 3%, the region with the second highest overcrowding in its housing stock. London’s housing problems are also reflected in homelessness: rough sleeping in the city has increased every year since 2007 to reach 7,600 in 2014-15, and London has three times more households in temporary accommodation than the rest of England put together.

What do these trends mean for the prospects for poverty in London? The next round of welfare changes are likely to make things worse: there are the changes to tax credits, which will affect 640,000 children in London, but other less discussed changes to housing benefit that will also bite. The next cut to the benefit cap will reduce the income of the 10,500 already affected, and cut incomes for another 20,000 by up to £58 a week. If the recovery in the labour market continues, then that might soften the blow of welfare reform and rising rents. But something much more radical is now required for the housing crisis in London, for at the moment, the worst brunt of it is borne by some of the capital’s poorest residents. 


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