A minimum income standard for London 2020

A Minimum Income Standard (MIS) is the income that people need in order to reach a minimum socially acceptable standard of living in the UK today, based on what members of the public think.

This latest research from the Centre for Research in Social Policy at Loughborough University funded by Trust for London looks at what is needed for a decent living standard in London, focused on households with children. Groups of parents in Inner and Outer London discussed and detailed what these households need in order to have a minimum socially acceptable standard of living in 2020.

While life for many Londoners was very different in 2020 than in previous years as a result of COVID-19, this research asked groups of parents to think about and reach consensus about minimum needs in a pre-pandemic London. Further work to understand the impact of COVID-19 on minimum living standards will be undertaken in 2021.

This study also calculated the difference in a minimum household budget between the capital and elsewhere in the UK, and the implications of this difference for the adequacy of social security and wages. Finally, the findings of the research were used to look at the number of households falling short of meeting this minimum standard in the capital and how this has changed over time.

• 4 in every 10 people living in London (41%) have an income below what is needed for a minimum standard of living. This is a well above the 29% below this level in the UK as a whole.
• 3.62 million Londoners are living in households with inadequate incomes. Just over 1 million children in the capital are growing up in households below the minimum income standard (MIS).
• In many areas of life, minimum needs and the costs of meeting these are the same for households with children in London as for similar households living in other urban areas of the UK. For example, in the latest MIS UK research, parents included a monthly Netflix subscription for a single device, with streaming replacing the DVD player as a cost- effective source of family entertainment, enabling people to participate in the world around them. Groups of parents in London agreed that there has been a shift in how the need for family entertainment is met, and consequently also included this Netflix package.
• In key areas, there are differences between how minimum needs are met in London compared to urban UK outside London, and the cost of these. Housing and childcare needs are largely the same in London, but the cost of these is substantially higher, in general, in the capital. Transport needs are met in different ways in London, particularly for households with children – elsewhere in the UK, households with children need a car, while in London public transport is sufficient to meet these minimum needs. This difference has implications for minimum budgets, bringing small ‘savings’ for some lone parent households while increasing transport costs for other households with children.
• The additional costs of a minimum budget in London mean that a decent standard of living in the capital costs between 14% and 56% more. The largest difference is for single working-age adults, living alone in Inner London where the cost of housing in the private rental sector are so much higher than other urban areas in the UK.
• Safety-net benefits for people living in London continue to fall short of meeting minimum needs, providing around a quarter of a minimum budget for working-age single in Inner London and around half of what is needed by couple parent households in the capital.
• The temporary uplift of £20 a week that has been given to working households entitled to tax credits – although not given to non-working households in receipt of ‘legacy benefits’ – and to both working and non-working households claiming Universal Credit has reduced the shortfall between income and MIS in some cases, particularly for working households in receipt of support through Universal Credit: the shortfall for working couples (on the National Living Wage) with two children in Inner London claiming UC, with the additional COVID-19 support, is £39 a week, compared to £135 for the same households claiming legacy benefits.
• The temporary increase in Local Housing Allowance (LHA), covering up to the 30th percentile of rents and re-linked to actual market rents has had a significant impact on the shortfall between safety-net benefits and the income needed for MIS for some households. For example, single working-age adults living alone in Inner London, in receipt of out-of-work benefits, have seen an increase in the proportion of a minimum budget covered by these, from 19% in 2018 and 2019, to 27% in 2020. There remains a significant gap between income and needs, but restoring LHA rates to a level that covers the cheapest 30% of homes has reduced this gap.
• Over recent years, single working-age adults in London, working on the National Living Wage (NLW) have not seen the same improvements in the adequacy of their incomes as their counterparts in urban areas of the UK outside London. For a single person working full time in urban UK, the NLW will cover 87% of a minimum budget. In Inner London the proportion of costs covered is 70% (supported by Universal Credit) or 61% (supported by ‘legacy benefits’). Without the COVID-19 uplift, a single person working full time on the NLW in Inner London would provide 47% of a minimum budget under the tax credits system and 54% under Universal Credit. This shows how potentially valuable the temporary increases in state support are.
• 53% of children living in London are in households with incomes below what they need for a decent living standard, compared to 42% in the UK. More than three quarters (76%) of children in lone parent households are living below MIS.
• Just more than a third of pensioners living in London (35%) have incomes below MIS, compared to 21% in the UK.
• Three-quarters of individuals in the capital with incomes below MIS are living in rented accommodation.