The London Assembly’s Economics Committee has launched an investigation into low pay and the London Living Wage. In submitting evidence to this investigation, CIC has highlighted that:
• Britain continues to stand out among comparable advanced economies as having a particularly large share (21 per cent) of workers that are low paid.
• London is distinct from other regions in having more workers earning below a living wage (16 per cent) than below the low pay threshold (12 per cent). This reflects the fact that living wage rates are derived, in part, from a calculation of the basic needs of the recipient, which are higher in London due to higher living costs.
• Over four million individuals are borrowing from lenders with very high interest rates (typically 450%-2,500% APR), trapping them in a spiral of increasing debt. In June this year, the debt advice charity, Step Change, identified London as one of five cities that experienced the biggest rise in average payday loan debts in the last two years [1].
• High cost credit problems are the cause of mental health problems, create barriers to employment, and have negative impacts on local economic growth. More therefore needs to be done in London to counter its expansion and to improve access to affordable financial services for lower income households.
CIC has called for the London Assembly and Mayor to take a number of actions, including:
• Using their influence to encourage all parts of the public sector, which employs 950,000 people in London, to pay the London Living Wage and ensure that companies delivering contracts or sub-contracts on behalf of the public sector do the same.
• Develop a clear strategy to address London’s high cost credit problem, for example by:
o Banning high cost credit advertising on all public transport and computer systems;
o Calling for additional powers for London Boroughs so that they can stop the proliferation of high cost credit stores on our high streets;
o Launching a major publicity campaign across the capital to encourage Londoners to join their local credit union; and
o Securing an agreement with major banks to increase their support for credit union and Community Development Finance Institutions (CDFIs) across London, including by providing access to payment systems and providing capital investment.
Damon Gibbons from the Community Investment Coalition said:
“We welcome the London Assembly’s investigation into low pay and the London Living Wage. Low pay and the rising cost of basic household items such as fuel and food has led to a significant squeeze on household budgets. Households unable to access affordable financial services and struggling to make ends meet often have little option but to use high cost credit to cover the deficits in their budgets.
"The Mayor’s championing of the London Living Wage has highlighted the need for employees to be paid a more realistic minimum rate. But much more is needed. The impacts of high cost credit lending are felt all around us – it is increasing the pressure on health and public services and sucking money from our poorest communities. The Mayor needs to pull together an effective strategy to stop its expansion and provide affordable alternatives.”
[1] http://www.stepchange.org/Mediacentre/Pressreleases/Paydayloanflashpoints.aspx