Who can afford to live in London?

By Alison Blackwood, Senior Policy and Campaigns Advocate

Maybe it’s because I’m a Londoner that I love London Town… but who can afford to live there? Who are the Londoners who find themselves with debt problems, and are their problems any different from people living elsewhere in the UK?

With a new Mayor and Minister for London we felt that it was the right time to take another look at debt in the capital, and ask for a city-wide approach to preventing and reducing problem debt.

Debt is a London priority

We’ve used our data from 2015 to provide more details about how Londoners’ debt issues compare with the UK as a whole, and to see how they play out across the capital’s 32 boroughs.

Our resulting report London in the Red finds that problem debt continues to affect disproportionately more people in the capital than in the UK as a whole. Nearly one in five of our clients were from London last year.

In 2015 our London-based clients:

· had higher levels of debt

· had more and higher housing-related debt

· had to spend a bigger part of their income on essentials

The cost of debt to London’s economy

We estimate that around half a million Londoners are currently struggling to pay both credit commitments and essential bills, and that the social and economic costs from this amount to at least £1.4billion.

This is because debt worries can damage people’s health, reduce how well they do their job, or whether they can even hold on to employment. There are also links between debt problems and other harmful events, such as being evicted from your home or relationship breakdown.

These can all have wider costs through more demand for public services, like the NHS, or the loss of tax contributions and the extra money for benefits needed, if someone stops working.

‘Problem debt’ looks very different across London

Our data on debt in each of London’s boroughs found clear patterns. In the poorer boroughs more of our clients were struggling to pay essential bills, particularly their rent.

In contrast, in the richer boroughs, although average incomes were higher, our clients had a higher debt burden, mostly because they owed money on credit cards or larger overdrafts.

A London-wide approach to reduce debt problems

With a new Mayor and Minister for London, we think our findings argue for a new city-wide approach. Our results show that problem debt can affect any Londoner, no matter where they live or what they earn and Londoners fall into debt for many different reasons: losing their job, becoming ill or because of a divorce or separation.

A London-wide strategy, promoted by the Mayor of London, could show people that they shouldn’t feel ashamed about financial problems –we are all at risk — and encourage more Londoners to get free, high-quality debt advice as soon as money problems begin.

What we want to see

We’re asking the Mayor of London and Minister for London to:

1. Bring together London councils and debt advice services to make sure debt advice is properly funded, follows the highest standards and can help all Londoners

2. Publicise Debt Awareness Week across the capital to encourage Londoners to use free debt advice services as early as possible

3. Make sure that all London councils collect their own debts in a way that helps people who are having money problems and protects the most vulnerable

4. Promote ways to help people on low pay to begin saving and to use companies that offer low interest loans, like credit unions, when they need to borrow money

5. Ask the government to bring in a national “breathing space” scheme, that would allow people who ask for debt advice to have interest and charges frozen for up to a year, so they have time to improve their finances.

Let us know if you support our findings or have any additional ideas to help those with problem debts in London.