More than a quarter of households struggle to afford life in London

Pensioners and poorer families with children in London are bearing the brunt of a “perfect storm” created by the return of inflation, inadequate welfare benefits and sky-high costs for essentials such as childcare, according to a major new report.

It reveals how more than a quarter of households in London get by on incomes that leave them unable not only to afford essentials such as a warm home but also unable to pay for items deemed important for social inclusion, such as eating out occasionally.

Safety-net benefits also fail to provide for Londoners’ minimum needs, leaving those in inner boroughs facing a shortfall of £22.77 a week between housing benefit and their rent.

Life is a struggle even for those working on the national living wage – a compulsory rate introduced last year under George Osborne’s chancellorship. Few London households with someone earning the national living wage full-time were able to reach the income needed for a minimum standard of living, even though the wage rose by 4% in April.

The research by the Trust for London charity and Loughborough University’s Centre for Research in Social Policy is based on detailed discussions with members of the public about goods and services needed to achieve a socially acceptable standard of living. It uses a “minimum income standard” (MIS) for four types of London households, compared with the rest of the UK. Some 39% of Londoners have an income below the MIS, against 30% in the UK as a whole. The proportion of Londoners falling below the standard has dropped slightly over the past two years, but 3.3 million are still on incomes below what is needed for a decent standard of living.

Among its conclusions – likely to be seized on by those pressing for government action on housing benefits, public sector pay and housing – is that higher costs such as housing and childcare mean that reaching a minimum decent standard of living is between 16% and 53% more expensive in London than it is in the rest of the UK.

One relatively overlooked group in an increasingly precarious position are pensioner couples in inner London. Over the past seven years, the proportion unable to afford a decent standard of living has increased from 23% to 32% – a reversal in a long-running trend of improved living standards for this age group.

“Governments have suggested that pensioner poverty is largely a thing of the past,” said Matt Padley, the report’s author. “But even with the triple lock on pensions and linking of increases to rises in earnings and inflation, incomes for pensioners in the city have not kept up with increasing prices on things like rail travel, and are becoming less and less adequate. It’s really quite stark.”

Across all four types of households reported on – single people of working age, pensioner couples, lone parents with one child and couples with two children – the report found the cost of a minimum budget had risen since 2016 owing to the return of inflation after a prolonged period of price stability.

While there has been a considerable focus in recent years on family flight from London because of factors such as housing costs, Padley said evidence for this was patchy. “What we found is that people make a lot of sacrifices because what they get from living in London – such as the social and cultural experience – just about outweighs additional costs, so there was an offsetting.

“That said, you could now imagine a situation that if something is not done to sort out problems with the supply of housing, families with children are going to be more and more squeezed as the cost of childcare rises and support for it becomes less adequate.

“Add all those things together and you have a perfect storm for more people who we think will begin to decide: ‘It’s just not worth it. What I am living on in London is just not enough in terms of living standards.’”

The report says housing costs in London within the designated MIS budgets for families with children are based on social rents, but access to social housing for families is becoming increasingly restricted. “A growing proportion of families will be exposed to the often substantial additional housing costs of renting in the private sector,” it warns.

Mubin Haq, director of policy and grants at Trust for London, said the research showed there had been a slight improvement in the number of Londoners with too little to live on, but that the figure remained “worryingly high”, and that many recently moving into work were in low-pay sectors. The government had tried to boost earnings with the national living wage, but it provided only half of the income needed for a single working-age Londoner working full-time.

“Outside London, it provides over three-quarters of income required. The high cost of living in the capital is not reflected in the national living wage. This has harsh consequences for those earning the bare minimum.

“London can afford to pay a higher rate, and will struggle to recruit and retain staff if the disconnect between the cost of living and wages continues.”