Country reaches turning point on poverty

The report finds that almost 400,000 more children and 300,000 more pensioners are now living in poverty than in 2012/13. Since that year, there have been continued increases in poverty, across both age groups. Very little progress has been made in reducing poverty among working-age adults. In November, the Institute for Fiscal Studies (IFS) forecast that child poverty will continue to rise until the end of this Parliament.

Campbell Robb, chief executive of the independent Joseph Rowntree Foundation, said “These worrying figures suggest that we are at a turning point in our fight against poverty. Political choices, wage stagnation and economic uncertainty mean that hundreds of thousands more people are now struggling to make ends meet. This is a very real warning sign that our hard-fought progress is in peril.”

“Action to tackle child and pensioner poverty has provided millions of families with better living standards and financial security. However record employment is not leading to lower poverty, changes to benefits and tax credits are reducing incomes and crippling costs are squeezing budgets to breaking point. The Budget offered little to ease the strain and put low income households’ finances on a firmer footing.

“As we prepare to leave the EU, we have to make sure that our country and our economy works for everyone and doesn’t leave even more people behind.”

Twenty years ago, a third of children lived in poverty; this fell to 27% in 2011/12. In 1994/95, 28% of pensioners lived in poverty, falling to 13% in 2011/12. These falls were achieved by higher employment rates; more generous support for families through tax credits; and extra help for poorer pensioners.

Following the financial crisis of 2007/8 poverty rates remained stable. A combination of stronger than expected employment; tax and benefit policies which continued to support working and non-working households; and spells of low inflation helped negate the worst effects of the downturn for the least well-off families.

But changes to welfare policy – especially since the 2015 Budget – are reducing families’ financial breathing space, with wage growth at the bottom end of the labour market failing to make up the difference.

Poverty rates rose last year – to 16% for pensioners and 30% for children – suggesting gains are at risk of being lost without immediate action. 14 million people live in poverty in the UK – over one in five of the population. This is made up of eight million working-age adults, four million children and 1.9 million pensioners.

New threats are emerging to people in the poorest fifth of households. The squeeze on living standards now risks storing up problems for the future, with people being caught in a ‘standstill generation’ – unable to build the foundations for a decent, secure life. People on low incomes are increasingly:

• Trapped in in-work poverty and unable to progress. 8 million live in families where at least one person is in work. One in eight workers, 3.7 million people, live in poverty and 40% of working-age adults with no qualifications are living in poverty – facing a barrier to work or better pay.
• Struggling to afford a home. Almost half on the lowest incomes (3.2 million working-age people) now spend more than a third of their income on housing. Falling homeownership means that in the future more older people are likely to rent and have higher housing costs in retirement.
• Facing rising costs. Since 2003, people in the poorest fifth of the population have experienced a higher rate of inflation than the rest of the country in every year except 2010. Food and energy bills take up a larger share of incomes, leaving people on low incomes with little room for manoeuvre when prices rise.
• Falling behind with bills and unable to put away for a secure retirement. 2.2 million of the poorest households have ‘problem debt’ and 70% of people in work in the poorest fifth of the population are not contributing to a pension, around 2.3 million people.

JRF says the Government must end the four-year freeze on working-age benefits and tax credits. The freeze is the single biggest policy driver behind rising poverty, hitting families in and out of work, and ending this should be prioritised over increases in the personal tax allowance to help low-income families, which do little to help the worst-off.

It also urged the Government to invest in a more ambitious house-building programme that provides 80,000 new genuinely affordable homes to rent and buy every year that are in the reach of low income families, over cuts to stamp duty that benefit people who own or can already afford to buy.

With people getting stuck in low-pay and working poverty, JRF is calling for the Government and businesses to drive up adult skills. It could use the industrial strategy to double participation in digital, literacy and numeracy training to meet all basic skills needs by 2030 so people can get on at work and progress to higher wages.

The full report can be found here.