Comment: The increase in the London Living Wage will be undermined by cuts elsewhere

Over 600,000 London families in receipt of child and working-tax credits are at risk of being plunged into poverty

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Even with the welcome news of the uprated London Living Wage (LLW), the mayor of London has a long way to go before he can convince low paid Londoners that he is fighting their corner.

Londoners whose pay is linked to the LLW, who have been confronted with the rising cost of renting and living over the past year, will of course be given a boost by the decision to put the LLW up to £9.40, a 25p increase from £9.15.

But the modest increase in LLW is quickly undone by significant cuts elsewhere, when you factor in impending tax credit cuts and a hit on other working age benefits.

The truth is that life looks set to become increasingly difficult for the capital’s working poor.

London remains the most unequal city in the UK, where the disparity between the rich and poor is shamefully stark. Beyond his warm words, Boris Johnson has done very little to redress this balance during his time as mayor.

This is made all the more evident by the fact that by 2014 Londoners were, on average, £2,097 a year worse off than they were when Boris Johnson took office in 2008. For the capital’s low paid, this real terms reduction in income has been felt more keenly, particularly in the face of rising fuel, housing and transport costs.

Any attempt to address the growing gap between the capital’s wealthy and impoverished would be greatly helped by a widespread implementation of the LLW. In his 2020 Vision, Boris pledged that ‘by 2020 the London Living Wage should be the norm’. Ambitions are one thing, but it is action where the mayor seems to be falling far short.

Indeed, the number of people paid less than the LLW – both as a number and a proportion – has significantly increased during Boris’ two mayoral terms. In some London Boroughs, such as Harrow, the outlook is particularly dreary with over 40 per cent of jobs paying below the LLW, meaning in those areas approximately four-in-ten workers are taking home less than is needed to live on in the capital.

Whilst some workers will welcome this latest rise in the LLW, only a few truly have cause for celebration. Firstly, the increase only applies if your pay is linked to the Living Wage. For those employees whose pay falls below this, the increase offers little more than an unwanted reminder of the glaring disparity in income in the capital.

Secondly, for those who will find themselves in receipt of the new £9.40 rate next year, looming cuts to working age benefits, such as tax credits, are enough to undo not only this year’s increase but years of progress.

A report published this week by GLA Economics stated that without means-tested benefits, including tax credits, the LLW would need to be significantly higher.  Specifically, the report asserts that ‘if means-tested benefits were not taken into account (that is, tax credits, housing benefits and council tax support) the Living Wage would be approximately £12.00 per hour’.

In total, over 600,000 London families in receipt of child and working-tax credits are at risk of being plunged into poverty by these cuts. Working families will be worst hit, accounting for the majority of those at the sharp end of the ‘reforms’.

Boris Johnson must reveal what he plans to do with his last few months in office to protect low paid Londoners from the harsh ramifications of government cuts.

Without a mayor to champion Londoners’ interests, the most recent rise in the LLW could prove to be yet another example of the mayor and government’s tendency to ‘give a little, take a lot’.

Fiona Twycross AM is Labour’s London Assembly Economy spokesperson

One Response to “Comment: The increase in the London Living Wage will be undermined by cuts elsewhere”

  1. Godfrey Paul

    The same applies to all wage earners.

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