What are the drivers of poverty in London today? asks New Policy Institute’s Carla Ayrton

Posted on 15 Nov 2017 under News

On 17 October 2017, United Nations’ International Day for the Eradication of Poverty, the APPG on Poverty and the APPG for London co-hosted an event with London Child Poverty Alliance to launch London’s Poverty Profile 2017. London has the highest rates of poverty in England. At the event London MPs were given constituency-specific information on a wide range of indicators including income poverty, housing, education and debt. In this blog Carla Ayrton, research analyst at the New Policy Institute (npi) and co-author of the report, asks; what are the drivers of poverty in London?

 

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.

Carla Ayrton, research analyst at npi

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.

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.

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.

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.

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.

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.

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.

 

Carla Ayrton, research analyst at New Policy Institute (npi)

This blog was originally posted on npi’s website

 


[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.


London Poverty Profile 2017 was commissioned by Trust for London

Key findings:

  • The proportion of Londoners living in poverty after housing costs are taken into account has fallen from 29% to 27% over the last six years. In the rest of England, the latest figure is 21%. The cost of housing is the main factor explaining London’s higher poverty rate.
  • The majority of people living in poverty (58%) are living in a working family. Partly due to rising employment, the number has risen to 1.3 million over the last decade, an increase of around 50%.
  • More people in poverty live in the private rented sector than any other housing tenure, nearly 1 million. This marks a large shift from 2009/10, when it was the tenure with the fewest people in poverty. The number of children living in poverty in this sector has tripled over the last decade.
  • Wealth inequality is more pronounced than income inequality in London. The top 10% of households received nearly 30% of income but owned just over 50% of total wealth. The bottom 50% of Londoners received nearly 25% of income but owned only 5% of wealth.
  • While income inequality has declined over the last five years, wealth inequality has increased.
  • Unemployment fell to 280,000 in 2016, far lower than its peak in 2011 at 430,000. The number of workless households is at a historically low level.
  • 21% of employees are paid below the London Living Wage, compared with 22% a year earlier. This was the first year without an increase since 2009.
  • 8% of working-age adults are receiving an out-of-work benefit. Five years earlier, this was 12%.
  • Sanctions (ESA, UC and JSA) have fallen to 40,000 in London compared with a peak of more than 130,000 in 2012. The sanction rate for JSA had been 5% and is now 2% of claimants. However, the sanction rate for UC is 6%.
  • The net increase of 6,700 affordable homes in 2015/16 represented just under 40% of the London Plan target of 17,000 a year. Only 1 in 4 new home completions were affordable.
  • Local authority rents in both London and England have increased more rapidly than private rents over the last five years (around 30%). Over a similar period, the number of children in a social rented home and living in poverty has increased by 40,000 in London.
  • Seven in ten households in temporary accommodation in England are in London. Over 80% of these households contained children.
  • The difference between the proportion of disadvantaged pupils and the proportion of all other pupils attaining an A* to C in maths and English GCSE at 16 (the attainment gap) in Inner London is almost half (16 percentage points) of the attainment gap in the rest of England (30 percentage points).
  • Disadvantaged students from Inner London are more likely to attend higher educational institutions than other students (nearly 60% do so), but are less likely than non-disadvantaged students to attend Russell Group universities.
  • In just over a decade, London has gone from having a higher infant mortality rate than England to a lower infant mortality rate. This is a fall of around 40%.

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