Low income Londoners and Welfare Reform
Policy in Practice’s latest analysis shows that 1 in 7 low-income Londoners can’t make ends meet. Their analysis of 550,000 low-income London households finds a 21% rise in low-income Londoners facing a cash shortfall since 2016. The number of families who are struggling is expected to triple by 2020.
The analysis found that:
- One in every three low-income families faced a cash shortfall for at least one month during the two years covered by the analysis.
- Struggling families typically accrued a shortfall of over £2,000, with the shortfall lasting an average of nine months.
- The boroughs with the greatest proportion of low-income families facing a cash shortfall were Enfield, Brent and Camden.
- Overall, two thirds of low-income households face a drop in disposable income of more than £30 per week by 2020.
Tracking households over twenty-four months gives new insights into the drivers of financial resilience.
- Employment and higher earnings are the main paths toward improved financial resilience, closely followed by changes in benefit income (e.g. taking up benefits).
- The most common driver of experiencing a cash shortfall was a drop in benefit income, highlighting the importance of social security in supporting those on the lowest incomes.
- One in four households falling into deficit had a member who had lost their job or saw a fall in their earnings.
- Employment income was crucial for people’s financial wellbeing: 45% of working-age households on low-incomes studied were in employment.
- More than one in four of the nearly 230,000 households in work lost their job at least once. This highlights the need for job stability and higher pay as well as increasing employment rates.
This research was supported by a Trust for London grant. It has been extended for a further eighteen months and will track the impact of Universal Credit as it rolls out across the capital. Future analysis will include a public facing dashboard on the impacts of welfare reform, and analysis as requested by participating authorities.
The analysis is based on data used to pay out over £24bn in Housing Benefit payments each year. Ten of the participating local authorities are using the household-level data to target tailored support to households most in need, and to track the impact of their interventions.
This research shows how wider use of administrative data can help ensure resources are targeted to those that need help the most. Councils can use their data to help with practical problems, making sure struggling families get the help they need as they move onto Universal Credit. We would like to see this type of systematic analysis adopted by government.”
With welfare reform, rising living costs, job insecurity and the roll-out of Universal Credit, it is a time of real change for low income Londoners. The response from policymakers needs to be right if we are to prevent many thousands of people from being pushed into real financial hardship because of the changes.
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