High cost of living leaves us broke

It is by far the wealthiest part of Britain, with as many millionaires as the rest of the country put together. However, for most of us it is a different story when it comes to hard cash to spend at the end of the month.

According to a major new survey the crippling cost of life in the capital means millions of Londoners are struggling to make ends meet.

After household expenses, mortgage payments and bills, the average Londoner has just £207.93 a month - or around £50 a week - to spend, less than any other region apart from the North-East.

Astonishingly, almost 30 per cent say they have "nothing" to live on once all their direct debits and other payments have gone out of their bank accounts. A further 31 per cent had less than £100 spare to see them through the month.

The findings come amid growing evidence that the true cost of living has soared over the past few years with rising council taxes, national insurance, housing costs and utility bills all eating into disposable incomes.

One study this week suggested families are having to find £1,500 a year more to cover their costs than in 2002, and that the "real" rate of inflation is three times the Government's official measure.

The higher bills have triggered a dramatic collapse in the "feel-good" factor, with millions of consumers reining in their spending in August.

Today's survey of 2,000 people, commissioned by investment specialists Cofunds, found that Londoners have borne the brunt of the increases in daily costs. The prices of petrol, housing, childcare and insurance in the capital have all far outstripped inflation since Labour came to power in 1997.

The burden of higher interest rates has also fallen disproportionately hard on Londoners because sky-high property costs mean they have the biggest mortgages. The congestion charge is also effectively a tax on the capital.

Other future costs likely to affect Londoners include water bills, due to rise by 39 per cent over five years, and increased inheritance taxes, which will hit those in areas that have expensive property. Even the money that is left over buys less in London.

A whole range of goods, from beer to cinema tickets, cost more in London. While average salaries have risen 48 per cent in seven years, they are struggling to keep pace with the high cost of living.

Rick Andrews, marketing director to Cofunds, said: "The cost of living is taking its toll on Londoners and the findings destroy any notion of a genuine North-South divide when it comes to the nation's wealth gap."

People in the South-East, where there are far fewer on benefits or in low-paid jobs, came out top of the league table.

MPs said London weightings designed to offset the cost of living in the capital were just "drops in the ocean".

Liberal Democrat Treasury spokesman Vincent Cable, MP for Twickenham, said: "Although there is much notional wealth in London, it is rapidly becoming a place where it is becoming impossible for people on middle incomes to live.

"Anyone who has to buy or rent housing can simply no longer afford to live in London." A study by accountancy firm Numerica this week revealed that London residents face living costs rising at almost four per cent a year, far more than the 1.4 per cent rate of the official Consumer Price Index.

The Numerica calculation includes increases in mortgage interest payments, council tax, national insurance contributions and utility bills as well as the usual basket of goods.

It shows that in the past two years the typical married couple will have been hit by a ?900 increase in mortgage costs, extra council tax of £126, a £305 hike in national insurance and utility bills that have gone up by ?225.

Figures from accountants Smith & Williamson show the typical higher-rate taxpayer is returning 50 per cent of salary to the Treasury in taxes.