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Benefits & welfare reform

Key points

  • 525,000 people in London were claiming an out-of-work benefit in 2014. This has been falling since the post-recession peak of 690,000 in 2009. This fall has been driven by a drop in the number of jobseekers but also in lone parents claiming Income Support which halved from 130,000 to 70,000.
  • Throughout the 2000s the proportion of working-age adults claiming a key out-of-work benefit was higher in London than the rest of England. In 2014 it was lower in London at 8.8% compared with 9.0% elsewhere. The rate has fallen across London. At 12.9%, the out-of-work benefit claim rate in Barking & Dagenham was the highest in London but this is 5.4 percentage points lower than in 2009.
  • Housing benefit claims in London peaked in 2013 at 850,000 and fell to 820,000 in 2015. The social rented sector accounted for 560,000 claims and the private rented sector 270,000.
  • In London there are now more working housing benefit claimants in private rented accommodation than workless. This is distinct to the capital where half of private renting claimants are working compared with a third in the rest of England. Overall, a third of housing benefit claimants are working.
  • Half of 0 to19-year-olds in London (1.1 million) live in a family that receives tax credits. 640,000 live in working families and received on average £8,100 a year in tax credits; an amount that is likely to be much lower from April 2016 due to government cuts.
  • In 2015, 10,500 families in London were affected by the overall benefit cap, almost as many as in the rest of England put together. This includes 2,400 families losing more than £100 a week; 6,500 affected families had at least three children. When the cap is lowered to £23,000 those already affected will lose a further £58 a week and an additional 20,000 households in London will be capped.
  • In 2014 in London, there were 82,000 Jobseeker's Allowance (JSA) benefit sanctions. This is a decrease of more than 40,000 compared with 2013 but it is still double the number in 2006. Claimants aged 16 to 24 are the most likely to be sanctioned - in a typical month in 2014 8% of JSA claimants aged 16 to 24 were sanctioned.
  • Since housing benefit entitlements have been cut the number private renting claimants in London moving within their borough and to outside of London has fallen.


The trends in benefit claims suggest that things have improved in London in recent years. There has been a substantial fall in numbers claiming out-of-work benefits as employment increases. Even housing benefit, which had been slower to start falling, has fallen due to fewer claims from workless families.

But we have also seen that high housing costs and benefit cuts are making it increasingly difficult for low-income households in London. So to what extent do the falling levels of benefit reflect low-income people becoming better off, leaving London or just managing with less money? Our data on the number of households claiming housing benefit in the private rented sector in London that moved to another private rented home in 2011 and in 2014, sheds some light on this.

It shows that most of those who move home remain within their borough. The number moving from within London to outside London is relatively small at around 3,000 a year (2,300 moving from Outer London and 800 from Inner London). This compares with annual falls in out-of-work benefit claimants of 30,000 to 60,000 a year over the last three years. So the fall in benefit claims are 10 to 20 times higher than the recorded moves out of London by private renting housing benefit claimants.

The data also shows that there has been a fall in moves overall between 2011 and 2014. This has happened across the country - private rented housing benefit claimants are much less likely to move than previously. This could be because housing benefit changes have cut the supply of better alternatives so more households are staying put. Of those who do move, the proportion moving to outside London is largely unchanged.

This suggests that despite benefit cuts and high housing costs, low-income families are staying within London. Some are perhaps better off, having found work. But many households, in and out of work, are spending a greater share of their income on housing and sacrificing other spending to stay where they are.

Further welfare changes were announced in the 2015 Summer Budget. Some (such as limiting child tax credits to the first two children) will only apply to new claimants. But other cuts will make individual families materially worse off than they are now. In particular:

  • freezing the value of benefits for four years (except certain disability and pensioner
  • benefits);
  • lowering the overall benefit cap to £23,000 per year in London;
  • lowering tax credits for households whose gross earnings exceed £3,850 a year.

When these take effect in April 2016 low-income families will have to make even more sacrifices to remain in London.