Down the Tube? Up the social ladder

Public transport by name is increasingly exclusive by nature.

Next time you're on the Tube take a look around you. If you think that it's increasingly full of white, business class professionals, it's because it is. According to newly-analysed data from Transport for London, slipping down the underground escalator means taking a step up the social ladder.

The data paints a stark picture of a growing social divide in our city. While richer groups speed to work underground, poorer and more diverse ethnic groups are forced to take the bus. Public transport by name is increasingly exclusive by nature.

The latest figures show that almost four in five of London's Tube users are now managerial and professional workers, and the situation is getting worse.

In 2003, Londoners in the bottom half of the income spectrum made up 28 per cent of Tube users, but in the latest data from 2009, this dropped to 22 per cent.

It is hard not to link these divides to a difference in fares (the cash price for a Zone 1 single fare is now £4). This week I've been talking to cleaners and caterers who cannot afford to use the Tube in the city they call home. Instead they flock to the bus, which remains expensive and problematic.

Take Elena, a cleaner from Columbia who works for £6.08 an hour. She holds down two part time jobs. Without access to the Tube or train, she has to leave her North London home at 5am. Together with hoards of other workers on the minimum wage, she gets a chain of buses before dawn breaks. Her need to travel between jobs means that she spends almost five hours a day travelling for six hours work.

At present Elena pays £68.40 for her monthly bus pass. If she were to buy a full travelcard with Tube access, it would cost £106, approximately one fifth of her monthly wage after tax.

The mayor doesn't seem to get the problem. Since Boris Johnson was elected, the cost of a weekly zone 1-4 travelcard has increased by 23 per cent, and he remains committed to 20 years of above inflation fare increases.

Migrant workers like Elena are particularly likely to be affected. According to TfL's figures, some 39 per cent of bus users are from black and ethnic minority communities compared to 29 percent of Tube users.

Bus dependency also continues to cause massive problems for families. Alberto, another cleaner, says his daughter has to leave the house at 5am with his wife. She waits at her mum's work reading until school opens, and she always arrives tired. Meanwhile Alberto makes his anxious journey across London. If he misses one of his busses or falls asleep, he risks being fired.

"I've seen the transport prices rise like crazy but the salary never increases," he says, "For a salary increase you have to fight. Throughout the years my money buys less and less so I'm encouraging the workers to get organised ... The problem is getting worse."

There are economic consequences too. Transport is the circulatory system of our economy, but workers like Elena have been known to turn down jobs because they are too expensive to get to. It also makes it difficult to make English classes, and it hits women hardest.

London Transport figures

According to the figures -- unavailable online but released by TfL to the New Statesman -- some 78 per cent of Tube users are now from managerial and professional groups, defined as ABC1s.

In contrast, just 22 per cent of Tube users come from C2DE groups associated with the bottom half of the income spectrum. This compares to 37 per cent of bus users who are from this category.

When the Greater London Assembly estimates that roughly half of London's population is in each group, something is clearly out of synch.

Although this decline in diversity was visible when Ken Livingstone was mayor, he's developing policies to buck the trend. If he is elected next year, he says he'd cut fares by 5 per cent in 2012 and freeze them until 2013.

As for Boris Johnson, we don't know what the consequences would be if he won another term in office. Under his watch, TfL have suspended the Underground Users Survey until further notice.

If such a move saves costs, it also buries bad news.

Rowenna Davis is Labour PPC for Southampton Itchen and a councillor for Peckham

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Q&A: What are tax credits and how do they work?

All you need to know about the government's plan to cut tax credits.

What are tax credits?

Tax credits are payments made regularly by the state into bank accounts to support families with children, or those who are in low-paid jobs. There are two types of tax credit: the working tax credit and the child tax credit.

What are they for?

To redistribute income to those less able to get by, or to provide for their children, on what they earn.

Are they similar to tax relief?

No. They don’t have much to do with tax. They’re more of a welfare thing. You don’t need to be a taxpayer to receive tax credits. It’s just that, unlike other benefits, they are based on the tax year and paid via the tax office.

Who is eligible?

Anyone aged over 16 (for child tax credits) and over 25 (for working tax credits) who normally lives in the UK can apply for them, depending on their income, the hours they work, whether they have a disability, and whether they pay for childcare.

What are their circumstances?

The more you earn, the less you are likely to receive. Single claimants must work at least 16 hours a week. Let’s take a full-time worker: if you work at least 30 hours a week, you are generally eligible for working tax credits if you earn less than £13,253 a year (if you’re single and don’t have children), or less than £18,023 (jointly as part of a couple without children but working at least 30 hours a week).

And for families?

A family with children and an income below about £32,200 can claim child tax credit. It used to be that the more children you have, the more you are eligible to receive – but George Osborne in his most recent Budget has limited child tax credit to two children.

How much money do you receive?

Again, this depends on your circumstances. The basic payment for a single claimant, or a joint claim by a couple, of working tax credits is £1,940 for the tax year. You can then receive extra, depending on your circumstances. For example, single parents can receive up to an additional £2,010, on top of the basic £1,940 payment; people who work more than 30 hours a week can receive up to an extra £810; and disabled workers up to £2,970. The average award of tax credit is £6,340 per year. Child tax credit claimants get £545 per year as a flat payment, plus £2,780 per child.

How many people claim tax credits?

About 4.5m people – the vast majority of these people (around 4m) have children.

How much does it cost the taxpayer?

The estimation is that they will cost the government £30bn in April 2015/16. That’s around 14 per cent of the £220bn welfare budget, which the Tories have pledged to cut by £12bn.

Who introduced this system?

New Labour. Gordon Brown, when he was Chancellor, developed tax credits in his first term. The system as we know it was established in April 2003.

Why did they do this?

To lift working people out of poverty, and to remove the disincentives to work believed to have been inculcated by welfare. The tax credit system made it more attractive for people depending on benefits to work, and gave those in low-paid jobs a helping hand.

Did it work?

Yes. Tax credits’ biggest achievement was lifting a record number of children out of poverty since the war. The proportion of children living below the poverty line fell from 35 per cent in 1998/9 to 19 per cent in 2012/13.

So what’s the problem?

Well, it’s a bit of a weird system in that it lets companies pay wages that are too low to live on without the state supplementing them. Many also criticise tax credits for allowing the minimum wage – also brought in by New Labour – to stagnate (ie. not keep up with the rate of inflation). David Cameron has called the system of taxing low earners and then handing them some money back via tax credits a “ridiculous merry-go-round”.

Then it’s a good thing to scrap them?

It would be fine if all those low earners and families struggling to get by would be given support in place of tax credits – a living wage, for example.

And that’s why the Tories are introducing a living wage...

That’s what they call it. But it’s not. The Chancellor announced in his most recent Budget a new minimum wage of £7.20 an hour for over-25s, rising to £9 by 2020. He called this the “national living wage” – it’s not, because the current living wage (which is calculated by the Living Wage Foundation, and currently non-compulsory) is already £9.15 in London and £7.85 in the rest of the country.

Will people be better off?

No. Quite the reverse. The IFS has said this slightly higher national minimum wage will not compensate working families who will be subjected to tax credit cuts; it is arithmetically impossible. The IFS director, Paul Johnson, commented: “Unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average.” It has been calculated that 3.2m low-paid workers will have their pay packets cut by an average of £1,350 a year.

Could the government change its policy to avoid this?

The Prime Minister and his frontbenchers have been pretty stubborn about pushing on with the plan. In spite of criticism from all angles – the IFS, campaigners, Labour, The Sun – Cameron has ruled out a review of the policy in the Autumn Statement, which is on 25 November. But there is an alternative. The chair of parliament’s Work & Pensions Select Committee and Labour MP Frank Field has proposed what he calls a “cost neutral” tweak to the tax credit cuts.

How would this alternative work?

Currently, if your income is less than £6,420, you will receive the maximum amount of tax credits. That threshold is called the gross income threshold. Field wants to introduce a second gross income threshold of £13,100 (what you earn if you work 35 hours a week on minimum wage). Those earning a salary between those two thresholds would have their tax credits reduced at a slower rate on whatever they earn above £6,420 up to £13,100. The percentage of what you earn above the basic threshold that is deducted from your tax credits is called the taper rate, and it is currently at 41 per cent. In contrast to this plan, the Tories want to halve the income threshold to £3,850 a year and increase the taper rate to 48 per cent once you hit that threshold, which basically means you lose more tax credits, faster, the more you earn.

When will the tax credit cuts come in?

They will be imposed from April next year, barring a u-turn.

Anoosh Chakelian is deputy web editor at the New Statesman.