In-work poverty in London increases by 70 per cent in past ten years

20 October 2015

The fifth edition of the Trust for London’s ‘London’s Poverty Profile’ provided by the New Policy Institute has investigated income, inequality, housing, work and education in the capital.

The latest report, which includes analysis of over 80 poverty and inequality indicators, has indicated that the total number of people living in poverty in London is now 2.25 million, meaning 27 per cent of Londoners are currently living in poverty (defined as households with income of less than 60% of the national median after housing costs are included). Of those, 1.2 million are classified as “in-work poor”; an increase of 70 per cent over the past decade despite the number of unemployed adults falling to its lowest level since 2008 and the number of workless households hitting a 20 year low.

The report suggests that improving employment prospects has not been enough to reduce poverty in London due to low pay and limited working hours. The number of jobs paying below the London Living Wage (£9.15 per hour) has risen for the fifth consecutive year and now accounts for 20 per cent of all jobs in the capital, whilst the number of temporary contracts has also hit a ten year high.

Another key reason for the rise in poverty figures despite improving employment statistics from the capital is the rising cost of housing, which has been a common feature in the previous four editions of the report. Those living in poverty in London are now most likely to live in private rented accommodation, with average rents having risen by 19 per cent over the last five years and now totalling £1,600 per month, compared to an 11 per cent rise in England and an average cost of £770 per month.This problem has been perpetuated by the failure of councils and house builders to provide affordable housing for those on low-incomes in the capital, with the report finding that the latest target for new affordable builds missed by 40 per cent and hence driving low-income individuals and families into private housing.

The report also found how poverty has continued to be exported from Inner London to Outer areas with inner boroughs such as Tower Hamlets and Newham showing significant improvements since the first report whilst outer boroughs such as Brent and Ealing now standing out for their low levels of employment and pay.

The analysis suggests that despite the welcome introduction of the ‘national living wage’, the planned welfare changes will lead to increasing poverty levels in the capital with the cuts to in-work tax credits in 2016 making 640,000 London children worse off whilst the lowering of the benefit cap will affect a further 20,000 families.

Mubin Haq, Director of Policy and Grants at Trust for London, said:

“A record number of Londoners are in work, yet this has had little impact on the numbers living in poverty in the capital. Over two million are on a low income in London, with an increasing number in working families. On too many occasions work doesn’t pay enough, leaving people living in precarious situations.”

“Whilst the national living wage is welcome, it falls well short of what is needed to live on and the proposed 2020 rate is already below the London Living Wage of £9.15 per hour. Action is also needed on costs, particularly in relation to housing. The numbers of affordable homes being built is a fraction of what is needed. There is no shortage of solutions to these problems. We can tackle them if there is the political will and drive to ensure London is a city for all and not just the wealthiest. With the Mayoral Election next year, there is a great opportunity to make London fairer.”