Fares and the London Living Wage

MQT on 2012-11-21
Session date: 
November 21, 2012
Question By: 
Valerie Shawcross
Labour Group
Asked Of: 
The Mayor


How did your upcoming announcement on fare levels for 2013 affect the London Living Wage rate you announced on 5th November?


Answer for Fares and the London Living Wage

Answer for Fares and the London Living Wage

Answered By: 
The Mayor

Boris Johnson (Mayor of London): Thanks, Val. Yes. You have asked whether the upcoming announcement on fares from January took account of the uprating of the London Living Wage. Conventionally in this country uprating of benefits and so on does not take account of future prices or future Retail Price Index (RPI) and that was why it was done as it was. I am glad that we are able to continue to increase the London Living Wage. London Citizens are making great, great progress in spreading that message. We are doing everything we can to help in the GLA. We had a great session the other morning. It is a good thing that the London Living Wage continues to put extra cash into the pockets of some of the neediest and hardest working people in London.

Valerie Shawcross (AM): Yes, we support the London Living Wage. It is not a benefit; people work for it. Would you accept, Mr Mayor, that in 2009 you raised the London Living Wage by 2% and then the fares went up by 7.1% after that. In 2010 the London Living Wage went up by 3.3% and then the fare announcement was 6.8%. This year the London Living Wage has gone up by 3% - we welcome any increase - and then the fares are going up, from January, by 4.2%?

Boris Johnson (Mayor of London): Yes.

Valerie Shawcross (AM): You do accept then that you are increasing fares at a faster rate than you are increasing the London Living Wage. Do you also accept then that causes a problem for lower paid families?

Boris Johnson (Mayor of London): Let me explain that the -- which of course always happened under the previous Mayor as well because the London Living Wage never --

Valerie Shawcross (AM): You have put the fares up at twice the rate that Ken [Livingstone, Former Labour Mayor] did so there is a bigger problem being caused.

Boris Johnson (Mayor of London): Under your administration and the administration you supported it was always the case that fares went up by a higher percentage than the London Living Wage - or virtually always on aggregate --

Valerie Shawcross (AM): Yes, but you have put the fares up by double the rate that they used to go up by --

Boris Johnson (Mayor of London): With a soupçon of intellectual honesty you would concede that.

Valerie Shawcross (AM): -- so there is a bigger gap here.

Boris Johnson (Mayor of London): The London Living Wage is calculated by quite a complicated system that involves looking at the costs incurred by a selection of London households and then calculating the wage required to meet those costs. That is one way. The second way identifies the median income for London approximately weighted for 11 household types then takes 60% of that median income. You then average those two figures and you add 15%. In that basket, transport is obviously factored in but as you can imagine it is not a massive component of the weekly cost. On any assumption were the London Living Wage to rise by 3% again next year, as you might reasonably expect that it would, it would more than compensate. That would be the equivalent to a rise of £9.61 per week which would be more than compensating for what is effectively -- if you look at the cost of the rise in a monthly Zone 1 Oyster Travelcard of £1.25 that well outweighs --

Valerie Shawcross (AM): Mr Mayor --

Boris Johnson (Mayor of London): I am trying to give Londoners the proper comparison.

Valerie Shawcross (AM): Mr Mayor, you are trying to give me a technical answer and I appreciate the accuracy and the detail with which you are attending to this --

Boris Johnson (Mayor of London): Which is what you need. You need a detailed technical answer.

Valerie Shawcross (AM): For the lower paid people --

Boris Johnson (Mayor of London): You need to be lathered with technicalities here.

Valerie Shawcross (AM): There are two problems with this. Firstly you have just basically outlined a system whereby the London Living Wage gets uprated by some reference to what the fare increase was last year. Actually, most people get paid the London Living Wage next year in the new pay round, when they are already paying not just last year's fare increases but the new fare increase --

Boris Johnson (Mayor of London): I know. I understand that, Val.

Valerie Shawcross (AM): If you are low paid you have got to get to work --

Boris Johnson (Mayor of London): I am trying to explain.

Valerie Shawcross (AM): You cannot --

Boris Johnson (Mayor of London): You are making a false comparison. What I was laboriously trying to say is you are making a false comparison.

Valerie Shawcross (AM): The point I am trying to make, Mr Mayor, is this is not just a technical issue --

Boris Johnson (Mayor of London): It is.

Valerie Shawcross (AM): -- it is about hardship. People have got to pay these fares to get to work and the fares have been going up really rapidly. The London Living Wage --

Boris Johnson (Mayor of London): I know. What I am trying to say is -- you are making a comparison between the London Living Wage and fares.

Valerie Shawcross (AM): -- is not matching it. There is another problem I wanted to raise with you, while we are on your technical debate here, Boris. The other issue is if you dig into that report you will see that the reference point on what the transport costs are for low paid Londoners is based on Zones 1 to 3 Travelcard so you are already in trouble if you live in Zones 4, 5 or 6 and people are increasingly having to move out. Why don't you look at basing the London Living Wage on something that is more fairly representative of people's enforced costs on transport?

Boris Johnson (Mayor of London): What I am trying to get at is that actually, in real terms, in cash terms, the increase in the London Living Wage more than outweighs the increase in transport costs for the average family. That was the point of my lengthy explanation just now.

You are making a reasonable point about outer London and costs in outer London. I am concerned to make sure that the Tube in particular remains value for people living in outer London. I point out that even with the increase Tube travel outside Zone 1 -- I will give you an example. A Zone 2 to 6 off peak fare of £1.50 would cover a journey from Heathrow to Earls Court on the Piccadilly line or from Richmond round to Stratford on the Overground. You can get a long way in outer London on quite a reasonable fare. That is an important point.

Valerie Shawcross (AM): Mr Mayor, you admit there are some issues here --

Boris Johnson (Mayor of London): Of course.

Valerie Shawcross (AM): I would be grateful if you would look at them again before next year.

Boris Johnson (Mayor of London): Yes. Val, what I said to you repeatedly in our long conversations about this in the run up to my fares decision was of course I look at the impact of fares on the lowest paid and of course we have to take that into consideration. But we have protected every single one of the concessions that Londoners have and do not forget Londoners have these unlike virtually any other city in Britain. Nowhere else has a 24 hour Freedom Pass for older people. No one else has the benefits that we have for young people. It is still the case that the average bus fare in this city is about 65p compared to £1 in other cities --

Valerie Shawcross (AM): All right. I will leave it there, Chair.

Boris Johnson (Mayor of London): -- and that is because of the way we have been able to use our funds to bear down on fares while simultaneously getting Londoners the improvements in infrastructure that they want.

Your point about the impact of costs of transport on lower paid people is absolutely understood by me and by this administration but when you compare the -- where I think you have gone wrong, intellectually, is trying to say that the increase in the London Living Wage is smaller than the fares increase because when you look at the figures --.

Valerie Shawcross (AM): Chair, if I may, he has made the point.

Boris Johnson (Mayor of London): I am entitled to give a long answer to a question that deserves a proper answer --

Valerie Shawcross (AM): I would be grateful if he did not use up any more time repeating himself.

Boris Johnson (Mayor of London): When you look at the figures you can see that in cash terms the increase in the London Living Wage more than outweighs the increase in transport costs.

Valerie Shawcross (AM): I would like to see you live on it, Boris.

Jennette Arnold OBE (Chair):Jennette Arnold OBE (Chair):Kit Malthouse (AM): Mr Mayor, there is another party to the London Living Wage which is employers. It is important, in what is a voluntary scheme, that employers do not see sudden increases in the London Living Wage that might undermine it as a voluntary scheme and might restrict the uptake of it. Would you therefore support the proposal by London Citizens that into the formula there should be some kind of damping mechanism to make sure that there are not sudden unpredictable rises in the London Living Wage which might not only undermine its progress in London but cause businesses to withdraw?

Boris Johnson (Mayor of London): Yes. The London Living Wage has, as you know, gone up 25p, £8.55 from £8.30. We are asking business to pay this. Thank you, Val, for your support; you have been there right from the beginning. The success of the campaign that has been run by London Citizens, with our active support, is that companies are signing up. That is what we want to see. They are doing it voluntarily because they understand the benefits it brings to their employees in terms of loyalty and productivity and actually helping them to reduce employment costs. You must be careful not to deter them by being unreasonable.