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Social Justice

UK poverty: the facts, figures and effects

The Covid-19 crisis has driven disadvantaged households further into poverty. These are the facts you need to know

The UK has long had a poverty problem, with a decade of public service cuts pushing families across the country further into hardship.

The Covid-19 crisis made life even harder for many after thousands were made redundant, lost income on the furlough scheme and faced higher living costs in lockdown.

It means many struggle to afford the food they need, forced to rely on food banks. Some will find it difficult to pay for fuel bills, transport or internet connections. And despite the country’s phased reopening post-lockdown, families across the country are still feeling the financial impact of the pandemic.

The problem is not exclusive to unemployed people. In-work poverty hit a record high just before the pandemic, with experts citing low pay, expensive rent and meagre benefit payments for the number of families trapped in poverty despite having jobs.The UK’s patchy welfare system has come under fire during the pandemic for not doing enough to support people through hardship, while families relying on benefits will face an annual £1,040 income cut in September when the planned Universal Credit decrease goes ahead.

Here we explain the facts and figures, and how the experts say we can end UK poverty for good.

How many people are in poverty in the UK?

Up to 14.5 million people were in poverty before the pandemic, the Government estimates, when taking housing costs into account. 

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With the UK population currently at nearly 67 million, that’s one in every four or five people. But another 700,000 people were plunged into hardship during the pandemic, the Legatum Institute said, taking the poverty figure to more than 15 million.

What causes poverty?

Some drivers of poverty are life events, like illness or redundancy. But most are structural, and exacerbated by increasing living costs, creating a cycle that keeps people trapped in hardship. 

That can include unemployment and low-paid, insecure work. People who have not had easy access to training or education can struggle to land a secure job, making it harder to escape poverty.

The UK’s welfare system also makes it difficult for those struggling to get a decent income. Social security is not enough for people in work, looking for work or dealing with health issues to avoid poverty, according to the Joseph Rowntree Foundation (JRF). 

Eight in ten people claiming Universal Credit in November were in work or looking for work, the charity said, calling it a “damning indictment” of society.

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Childcare and transport costs were already keeping workers on low incomes locked in poverty, making it difficult for them to increase their hours or get to higher-paying, more secure jobs.

Benefits can be difficult to access, and in some cases mean people risk lowering their income by getting a job.

It’s particularly difficult for people dealing with mental health issues like addiction to escape poverty, and people who have been in prison can find it difficult to get a job to support themselves.

What is in-work poverty?

Low pay, soaring housing costs, a weak social security system and costly childcare can all trap people in poverty despite being in work.

The number of working families struggling to make ends meet hit a record high just before the pandemic, according tothe Institute for Public Policy Research (IPPR), with one in six working households – or 17.4 per cent – living in poverty.

More than 30 per cent of couple households with one full-time earner are in poverty, nearly as high as the rate of hardship for families without any full-time workers.

The research showed the UK had hit its highest in-work poverty rate in the 21st century, while the chance of households with two people in full-time work being pulled into hardship has doubled since the millennium.

An increasing number of people can’t afford to buy property so are forced to rent, but rent costs rose by almost half (48 per cent) in real terms in the past 25 years.

It means increased housing benefits are “effectively channelled into the pockets of private landlords,” according to the report, with an estimated £11.1bn of state support for tenants ending up with landlords while tenants still struggle to afford essentials such as food and heating.

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In-work poverty increased across the entire country but rose most sharply in London (22 per cent of households), Wales and the north of England (both 18 per cent of households).

The figures show that “one in six households are trying as hard as they can but still finding it impossible to feed their families and provide a safe roof over their heads,” said Right Reverend Rose Hudson-Wilkin, a member of IPPR’s welfare state advisory panel.

“The gulf between the rich and the poor is growing, as the pandemic showed us all too clearly.”

What are the consequences of poverty?

Poverty drives chronic stress as a result of worrying about how to afford living costs day to day, increases feelings of hopelessness, makes it more difficult to access healthcare and lowers self esteem. 

That stress – and difficulty affording nutritious food – also means those living in poverty are more likely to experience health problems, while finding it tougher to get treatment.

Parents and carers told research project Covid Realities that they had experienced stress, anxiety and low mood while claiming universal credit in particular. This was linked with trying to get by on payments that were not sufficient to cover living costs, and financial insecurity associated with the way the universal credit system operates, including the five-week wait and requirements to job hunt during the pandemic.

People in poverty are also less likely to have strong social support networks around them because all their energy has to be used to survive with few resources. This puts them at higher risk of homelessness and addiction problems.

Children living in poverty are more at risk of being exploited by or becoming victim to criminal gangs, the Children’s Commissioner warned, highlighting local authority “failure” to stop disadvantaged children from falling through the cracks in services.

How is UK poverty measured?

The criteria of relative poverty is in flux and depends on the economy, unlike absolute poverty. It looks at how many people might be just managing but who can’t afford the normal activities and opportunities that average earners have access to, known as an ‘ordinary living pattern’.

Households in relative poverty earn 60 per cent of the median earnings at the time. However the figures are adjusted according to how many people are in a household since their income needs will differ.

For example, a two-parent family with two children currently needs to earn £20,852 in order to stay out of relative poverty. For a single parent with two children, they need to earn £1,287 a month. 

The UK’s statistics watchdog has repeatedly warned the government over its use of poverty figures, suggesting ministers are selective about which poverty measures they quote.

Most recently, the Office for Statistics Regulation (OFR) wrote to Downing Street over comments made by Boris Johnson at Prime Minister’s Questions on May 26.

In a letter to No. 10, the OFR said it had received complaints over Johnson’s claims that child poverty had fallen since 2010. 

“Measuring poverty is complicated and different measures tell different parts of the story,” the letter from Ed Humpherson, director general for regulation at the OSR, read.

Johnson was referring to the level of absolute poverty in the UK, defined in Westminster as income worth less than 60 per cent of the median annual earnings in 2010-11. But the Department for Work and Pensions also collects figures on relative poverty, which is dependent on the state of the economy at any given time.

The number of children living in absolute poverty fell slightly in 2019-20 compared to figures from ten years ago, but relative poverty among children has increased since the Conservatives came to power in 2010, including a rise of 800,000 children in working households

“It would help aid public understanding if statements concerning child poverty were clear about which measure is being referred to, particularly where other measures present a different trend,” Humpherson said in the letter.

The UN measures poverty in a different way. Its definition of absolute poverty includes people who cannot afford basic essentials like food, clothing and housing. This measure makes it easier to compare conditions between countries – as the minimum income to keep up with basic living standards differs depending on where you are. 

The Social Metrics Commission calculates poverty taking into account costs like childcare and expenses linked to living with a disability. They also look at liquid assets, like savings and shares, that could act as a financial safety net.

Who is most affected by poverty?

There is a high poverty rate among families with children due to a combination of extra costs and childcare responsibilities. This means around 4.2 million children live in poverty in the UK. This impacts single parent families more, with 44 per cent of children with lone parents in poverty according to the Child Poverty Action Group.

Disability also significantly increases someone’s chances of falling into poverty. It means extra living costs, care costs and difficulty finding suitable work.

Ethnic minorities face high poverty rates in the UK, with 46 per cent of children in Black, Asian and minority ethnic (BAME) households affected compared to 30 per cent of all kids. 

Young Black workers were hardest hit by Covid-19 job losses, Resolution Foundation analysis showed. Unemployment among young Black people grew from 25 per cent to 34 per cent between Spring and Autumn last year, compared to a three percentage point rise (10-13 per cent) among young white people.

Zita Holbourne, trade unionist and chair of campaign group Black Activists Against Rising Cuts, told The Big Issue the government’s controversial race report “tried to separate poverty and austerity’s impact from anything to do with race”.

Poverty significantly impacts migrants too. The Government’s no recourse to public funds policy locks people out the social security system depending on their immigration status. It drives high poverty rates and puts them at an elevated risk of homelessness.

Gender affects poverty, with three million women in low paid jobs compared to 1.9 million men. Two-earner families where one partner works full time and the other works part-time are twice as likely to be pulled into poverty now compared to two decades ago, according to IPPR.

How does debt affect poverty?

Poverty can often cause a vicious cycle of debt. People on low incomes can be forced to rely on loans and credit to get by, racking up interest and arrears over time which amounts to more than they can afford to work their way out of. The UK’s debt is rarely shared equally, affecting poorer people more than it does the wealthy.

Household debt was on the rise even before the Covid-19 crisis. Seven million people were stuck in problem debt in 2018, according to the Centre for Responsible Credit, handing out more than a quarter of their income to pay off debt. 

The UK’s poorest households accounted for nearly half of those hit by debt and were paying out three times more than indebted households with the highest incomes.

It was down to low pay, cuts to the welfare system and insecure work, according to debt campaigners Jubilee Debt, accusing lenders of exploiting the desperation of people in poverty by charging extremely high interest rates.

How has the Covid-19 crisis affected poverty?

Towards the end of 2020, 23 per cent of the UK population was living in poverty. The 700,000 people plunged into hardship during the pandemic included 120,000 children. 

Growing poverty levels were driven by a few factors. Stay at home orders have driven up living costs, with households paying more for gas and electricity as well as spending more on food for children who might normally get free school meals.

That combines with soaring unemployment as lockdowns made it difficult for sectors like hospitality and retail to operate. The UK’s unemployment rate hit 5.1 per cent at the end of 2020, meaning 1.74 million people were out of work. Office for National Statistics figures showed a 454,000 rise compared to the same point in 2019 and the highest unemployment numbers since 2016.

UK households were worse affected by Covid-19 poverty than their counterparts in France and Germany, according to a cross-country comparison of the pandemic’s effects on inequality.

Brits faced a “far bigger living standards hit” than those in France and were more likely to rack up debt, despite being just as likely to have lost work in lockdown. Analysts said the UK’s “weaker” welfare system let people fall through the gaps.

A higher level of poverty prior to the pandemic and fewer people having substantial savings also left family finances less resilient to the economic shock of Covid-19 than in similarly wealthy European countries, despite average incomes being roughly the same.

One in three UK households (33 per cent) reported having had to cut back their spending, compared to 22 per cent in France and 21 per cent in Germany.

Women were more likely to be made redundant and fall into poverty during lockdown too, JRF figures showed. This was largely because they were more likely to be balancing childcare responsibilities with work, and more often worked in the hardest-hit industries.

And even those who kept their jobs but were placed on furlough were required to get by on 20 per cent less income than they normally would, while others faced drastically cut hours.

People from deprived areas and marginalised backgrounds are more at risk of catching Covid-19 and developing severe symptoms. This is because more people are still required to go into work in public-facing roles during the pandemic, as well as crowded housing where it is more difficult to self isolate and poorer health levels as a result of inequality.

“At the start of the pandemic, we recognised straight away that black people were contracting the virus and dying disproportionately,” BARAC’S Holbourne said. “They were more likely to be in precarious work and frontline roles and were therefore at higher risk. 

“And we made those links before there was any public research into the issues. Because around us, in our communities, we could see people contracting it and dying. We didn’t have to wait for data to know that that was happening, or to understand the reasons, because we already knew. Poverty, poor health in poverty and low pay.

“What we saw at the beginning of the pandemic was effectively an othering of Black communities, blaming us for contracting it and dying disproportionately. But it was because of poverty, and a year later nothing about those struggles have changed.”

Did the pandemic drive up debt?

The Covid-19 crisis put even more pressure on families struggling with debt. Around six million people fell behind on bills during the pandemic, Citizens Advice research showed, with the majority pushed into debt by charges from institutions such as council tax and benefit overpayments. Half of the people turning to Trussell Trust food banks for food in 2020 were struggling to afford the basics because they were paying back Universal Credit debt.

Covid-19, and its financial impact, was the fifth most common reason for debt in 2020 according to StepChange. It featured alongside debt drivers seen in previous years such as unemployment and other health problems.

Debt experts like StepChange have predicted “significant pent-up demand” as the Government’s temporary support measures to help people through the pandemic are rolled back in the coming months.

The proportion of people in debt who were single without children increased significantly in lockdown. They accounted for around 36 per cent of people turning to StepChange for help with debt in 2019, rising to nearly 45 per cent in 2020, and appeared alongside renters and single parents as the groups worst-hit by problem debt.

“Despite problem debt increasing, we actually took fewer clients through full debt advice as many adopted a “wait and hope” approach to their latent financial difficulties, utilising emergency support,” said Phil Andrew, the charity’s chief executive, adding that “the route out of Covid-induced debt for many households is not yet clear”.

“We shouldn’t forget that many of the other underlying drivers of debt that pre-existed the pandemic remained just as pernicious as ever,” he said. “The fact that a full half of our clients were in circumstances of additional vulnerability on top of their financial difficulty reinforces how closely debt is associated with negative changes of circumstances and life events.”

What would it take to end poverty?

Most campaigners agree reforming the welfare system is key to cutting UK poverty rates.

The five-week wait for a first Universal Credit payment has been shown to push people deeper into debt, driving food bank use and rent arrears. The two-child limit, which restricts the amount a family can receive in benefits to the first two children in a family should be scrapped too, experts say, if struggling families are to have enough money to live on. That’s along with the benefit cap, limiting the total amount people can receive regardless of what their full entitlement is.

In March last year, the Government introduced a £20-a-week increase to Universal Credit payments in response to the Covid-19 crisis. But unless the Government changes its mind, this will end in September. Despite repeated calls by campaigners, ministers have refused to commit to making the increase permanent. Families on the controversial benefit payments could lose £1,040 per year.Up to 700,000 people were prevented from falling into poverty by the uplift, the Legatum Institute said.

Crucially, the Government did not give this increase to people on so-called “legacy benefits” like Employment and Support Allowance. They DWP pays these to people whose disabilities make it difficult for them to work. Campaigners want the increase to be extended to them to cover higher living costs as well as pandemic expenses.

Increasing wages across the board – as well as strengthening the welfare system and reforming the rental market – is key to cutting poverty, according to a coalition of nearly 40 organisations.

Ministers must raise the minimum wage by 20 per cent for people on zero hours contracts as well as increasing housing benefits if they are to tackle UK poverty in the short-term, IPPR researchers said.

But without long-term reforms the government will face a perpetual choice between paying “constantly rising” social security bills or “allowing the number of working families in poverty to increase unchecked, as is currently the case,” according to their report.

That should involve more bargaining power for unions as well as transforming the benefits system – which was “eroded during the transition to universal credit” – to ensure people are better off.

It is crucial to minimise the proportion of household income that must be spent on housing costs, IPPR said, calling for higher taxes for property owners and radical investment in building more homes. 

Parents and carers with children under five should be given cash support to cover childcare, they added, and the families of school-age kids should have access to wraparound care.

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