Trust for London has commissioned economics and public policy consultancy WPI Economics to develop a new index to track the cost of living in London and the impact of rising inflation on poverty in the capital.
The index comes during a period of intense pressure on household and individual budgets, as we reach the highest inflation rate in decades and following years of stagnant wage growth.
Headline inflation figures alone do not provide a full picture of the impact of this pressure on those struggling to make ends meet, and this index will help inform a deeper understanding.
London particularly presents a specific challenge to assessment based on national figures, as the region with the highest poverty rate in the UK and the highest housing costs.
This index will utilise London-specific data to better reflect Londoners experience of inflation throughout this unprecedented strain.
The index will provide a new framework alongside this research, breaking down how the cost-of-living crisis is affecting Londoners of different income distributions, family types and ethnic backgrounds – and to what extent poverty in London could be impacted by the rising cost of living.
As with London’s Poverty Profile, also produced in partnership with WPI Economics, this index will continue to be updated with the latest data, allowing us to track how the cost-of-living crisis develops over time and to identify moments of particular concern.
By providing a clearer, consistently up-to-date view of how the cost of living is affecting Londoners and influencing inflation in the city, we also hope that the index will act as both a resource and motivation for the development of new policy that can better support those most at risk.
The index is set to launch by Autumn, alongside a report and visualisations presenting the initial findings from the model and its new methodology.
A higher proportion of Londoners were in-poverty than in any other English region pre-COVID (28%), and these households were spending more than half their income just on housing on average. Due to such high housing costs, Londoners (particularly those with low incomes) may be differently affected, and have far less capacity to weather price rises than households elsewhere in the country. This work will be crucial in better understanding the detail of the cost of living crisis for London, and help to shape the most appropriate responses.
Guy Weir, Head of Data Insights, WPI Economics
Families across our city are being put under unsustainable pressure in the midst of the worst cost of living crisis in a generation, and costs in London are skyrocketing. We need to use every possible tool available to us to understand the current and long-term impact of this crisis, and move swiftly to maintain and improve people’s living standards. Knowledge is power and the Cost of Living Index will provide us with valuable insight into how the crisis is impacting different Londoners.
Manny Hothi, Chief Executive, Trust for London