Home Insights Developing a Cost of Living Calculator for London

Developing a Cost of Living Calculator for London

**UPDATE: We have now developed a Cost of Living Calculator for England, which functions similarly to the London calculator. Select the calculator you want here:

Both calculators include a full user guide, and assumptions used can be found within the cover sheet.

Project background

Alongside the climate emergency, inequality and poverty will be the most significant and defining challenges for London over the coming months and years.

We have been working as part of the London 3.0 initiative to think about the nature of poverty in London and the extent to which London can (and should) aspire to be an equitable city.

We have been increasingly frustrated that analysis on the cost of living crisis in London can make sweeping judgements on the basis of median household earnings, without taking into account the diverse factors that will influence Londoners’ abilities to get by and prevent them and the city from thriving.

To help overcome this, we have developed a new Cost of Living Calculator to provide deeper insight into the lived experience of rising prices to help local authorities, civil society, and private sector actors to model the cost of living crisis in their communities. The purpose of the Calculator is to provide a better understanding of what gross pay in London actually buys once all essential spend has been considered.

Why focus on London?

Going into the crisis, many Londoners were disproportionately experiencing challenges of poverty and inequality. Despite record employment levels and the increasing productivity of the city, for many work has been failing to pay. Around 1 in 5 of jobs pay less than the London Living Wage, and the vast majority of children living in absolute low income households are part of working families. Many households were already struggling to afford essentials, with food bank usage increasing by 81% since 2016.  

Many Londoners are highly exposed to cost of living pressures and have less financial headroom to absorb rising costs. Evidence from the ONS Household Survey showed that people living in the capital pay a premium for household essentials such as food and clothing compared to the national average. Londoners also spend more on housing, fuel, and power than the England average in both relative and absolute terms.

These challenges are heightened for people living in the private rented sector. A shortage of available properties coupled with increased post-pandemic demand has resulted in Inner London rents rising by 21% in the last year.    

What does the Cost of Living Calculator tell us about inflation exposure in London?

Whilst it is important to understand the factors that contribute to poverty and cost of living exposure in isolation (e.g. fuel/water poverty) the recent Joseph Rowntree Foundation Deep Poverty Report showed that penury is impacting upon every aspect of people’s lives.

The Cost of Living Calculator effectively allows us to estimate the impact of the crisis on specific households rather than general areas of communities. It brings together all elements of essential spend to analyse the implications for monthly disposable income. It works on a borough by borough basis, allowing us to think about the geography of the crisis in London.

It shows that even accounting for the £150bn additional government support to freeze energy bills, multiple inflationary pressures will result in more Londoners experiencing poverty and low disposable incomes. It shows that as a result of spiralling essential costs, even multi-earner households could be left with no discretionary spend at the month.

For example, a key worker couple living and working in Newham with one child would only have £59 of leftover spend once all living costs have been considered.

A graph from the cost of living calculator showing how a couple of public sector workers with a three year old in Newham would see their after-tax monthly income dwindle from 4150 pounds to 59 pounds after various bills and essential costs are paid for

This will have tangible impacts on service delivery, with many people who do not usually engage with local authorities and community-led provision likely to require support.

How do I use the Calculator?

The Cost of Living Calculator is an open source tool. We hope that it will support public and private sector partners to make more informed judgements about  inequality in London. We will keep this up to date, taking account of changing government policy and interventions.

If you would like to discuss the Calculator, the Cost of Living impact in your area, or actions to support communities, please contact will.temple@prdemail.co.uk or rose.jump@prdemail.co.uk.