900,000 more in poverty – time to change course?

Posted by Krisnah Poinasamy Economic Justice Policy Adviser, UK Poverty Programmme

13th Jun 2013

Figures released by the government today confirm that the real incomes of 900,000 people fell below the poverty line in the year 2011/12, an increase in poverty equivalent to the size of Manchester twice over. Of this increase, 300,000 are children. In a country where the number of millionaires is rising, these figures are sobering and demand the attention of everyone.

Poverty is rising, across the board

Despite barely any change in relative poverty, people at the bottom are seeing their incomes fall in real terms. Child poverty and pensioner poverty are headed upwards - groups that in the past have benefited from government policies to reduce their poverty. But the biggest increase is amongst working-age adults, of which 600,000 saw their real incomes drop below the absolute poverty threshold.

Using After Housing Cost figures, the number of individuals in absolute low income has risen by 900,000.

Even during the 'good times' of consistent economic growth (pre-2008), efforts to reduce poverty began to grind to a halt as working poverty grew consistently since 2001.

Now the 'bad times' are seeing the poverty numbers escalate.

The backdrop is almost 800,000 more people unemployed than in 2008. Female unemployment is particularly worrying with a 25-year high expected to be reached by 2018.

Youth unemployment is just shy of one million, a rate of 21%, almost double that of 2001. And long-term unemployment has almost doubled in the last five years to 900,000, a 16-year high, to add another woeful string to the list of indicators.

Oxfam's work tells us the reality of poverty: mothers skipping meals to have money to pay for the kids' bus fare to school; a revolving door of no work or low-paid work; and as we saw last week, half a million people are now turning to food banks to put food on their table.

This is just the beginning...

Solutions must be considered. Raising taxes in a progressive manner is one solution. Plugging holes in the system is another.

What is truly terrifying is that this is the beginning of a steep rise in poverty - further planned cuts to jobs, services and social security mean there is much more to come.

The IFS has recently noted that most departmental cuts will now be deferred until after the next election.Whilst this may sound like welcome news, the savagery of the cuts means we can only expect harsh times ahead for the poorest people. There is also the expected loss of approximately 340,000 more public sector jobs in the two years to January 2015, with a further 359,000 from 2015-18, undoubtedly affecting the delivery of services that are a vital source of support to the poorest.

These changes will compound the effect of measures that have already taken place to lower social security, such as limiting welfare increases to 1% - i.e. lower than inflation - and capping the total amount of welfare irrespective of family size or rent levels. Ultimately, the resources that help people move out of poverty will diminish.

Our partners see the effect of this every day. "More than a million people have lost their benefits for periods of time since the Government started the sanctions regime, effectively leaving them destitute," says Danny McCafferty, chair of the Clydebank Independent Resource Centre.

"The number of people coming to get help from the Centre has roughly doubled, even though the vast majority of welfare cuts and changes are still to happen," he adds.

As the next five years of planned austerity take their full impact, the future looks bleak for people in poverty.

There are choices - let's turn the tide

It's time to change course. We need to make good the promise to not balance the books on the backs of the poorest. Many will argue that the indicators aren't useful, but they can't all be wrong and you can't hide long-term trends. Solutions must be considered.

Raising taxes and doing so in a progressive manner - so the poorest pay less as a proportion of their income - is one solution. Plugging holes in the system - by tackling tax avoidance and evasion - is another.  These measures could offset harmful cuts to services and social security, which are undermining resilience to tough economic times.

Properly addressing the underlying causes of youth and long-term unemployment through capital expenditure (investment) is another. Businesses that can afford it should also bear greater responsibility to ensure that work pays enough to live on (instead of the government effectively subsidising low-paid jobs through in-work tax credits).

The Comprehensive Spending Review on June 26 will seal the fate of spending over the period 2015-16. The coalition still has a chance to make good on its promises and do right by the poorest. 

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Blog post written by Krisnah Poinasamy

Economic Justice Policy Adviser, UK Poverty Programmme

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