Inequality Reduction, A Capital Idea

Because London was relatively resilient during the recession, the capital has increasingly come to be seen as the playground of the rich; the city that sucks in jobs and investment, benefitting all its residents at the expense of the rest of country.  As one of the two excellent reports released yesterday by the Centre for Analysis of Social Exclusion shows, a better explanation is that it is an exaggerated microcosm of overall UK inequality.

Its analysis looks at changes in economic inequality during and in the aftermath of the recession, and shows that between 2007/8 and 2012/13, Londoners’ median incomes fell by 3 per cent before housing costs and by 11 per cent after housing costs.  While the richest ten per cent of Londoners experienced a ten per cent fall in income, the poorest ten per cent have had to cope with double that reduction, leaving them with just £112 after housing, compared to £161 for the poorest 10 per cent nationally. The poorest ten per cent of private renters in London are left with even less after housing costs, their real terms incomes slashed in half between 2007/8 and 2012/13, leaving them with as little as £39 a week.  This means London’s income inequality has risen over the recession, so that someone at the top now has 9.2 times the income of a person at the bottom, double the ratio of the rest of the country, which actually saw a very slight decrease in that measure of inequality. 

For many on low pay, their hourly wage cannot keep pace with the high housing costs in London. The recession saw a leap in the proportion of Londoners paid below the London Living Wage, from 17 to 23 per cent, with nearly a fifth of men; more than a quarter of women; and up to half of workers in some ethnic groups earning less than the London Living Wage.

It’s bad enough being poor in London, but experiencing longstanding illnesses or disabilities often compounds the problems faced.  The research estimates that the poorest ten per cent of this group had a pre-recession income after housing costs of £141.  Post-recession, it was around £100, representing a drop in income of nearly a third, which is a more marked fall than elsewhere in the UK and double that of Londoners without disabilities.

Finally, there is wealth. Incredibly, the richest 10 per cent of Londoners (already far richer than their counterparts in other regions) emerged from the recession a quarter wealthier than they had been before it. Although wealth inequality actually decreased slightly over the period, the ratio remains staggeringly and unacceptably high. If we lined up Londoners according to their wealth, the person at the 90th percentile would be over 166 times wealthier than the person at the 10th percentile.  If we did the same for the rest of the UK, that figure would be 57. 

London attracts the international super-rich, benefits disproportionately from investment and infrastructure, and is often said to itself be a driver of UK inequality.  But we shouldn’t lose sight of the fact that through the recession, compared to the rest of the country, London’s rich got richer, and its poor got poorer.  Levels of inequality measured using the 90:10 ratio were greater than the rest of the UK on all of the following measures: income before housing costs, income after housing costs, wealth, full-time weekly earnings, full-time hourly wages and part-time hourly wages.

A country ought to be able to be proud of its capital city, but London’s appalling levels of inequality are instead a cause for shame. With the concentration of financial and political power in London, its culture of inequality sets a worrying precedent for the rest of the country. 

As the authors warn, “disadvantage and inequality in the capital are major challenges whoever gains power”.  But this message applies to the whole of the UK, and parties seeking election on May 7th should come prepared to tackle it nationwide.  

Lucy Shaddock, Policy and Campaigns Officer