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Social Justice

UK poverty: the facts, figures and effects in a cost of living crisis

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

Poverty is deeply entrenched in the UK, with a decade of public service cuts meaning millions of families across the country are struggling through hardship. The cost of living crisis is set to push many more people into poverty as soaring prices hit low-income households the hardest.

According to the Resolution Foundation, absolute poverty is expected to rise by 1.3 million people next year. That includes 500,000 children.

The cost of living crisis comes after the pandemic, when thousands were made redundant, lost income on the furlough scheme and faced higher living costs in lockdown. Now, with soaring energy prices, tax hikes and a cost of living crisis, people will struggle to make ends meet. 

It means many will struggle to afford the food they need and be forced to rely on food banks. The Trussell Trust gave out 2.1 million emergency food parcels between April 2021 and March 2022, an increase of 14 per cent compared to the same period between 2019 and 2020.

The UK’s patchy welfare system came  under fire during the pandemic for not doing enough to support people through hardship, while the most recent increase for universal credit (3.1 per cent) is less than a third of inflation, which reached 9.4 per cent in June.

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

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How many people are in poverty in the UK?

As many as 16 million people in the UK could be officially classed as living in poverty by 2023. Around 14.5 million people were in poverty before the pandemic, the government estimates. That’s one in every four or five people. 

The latest analysis by the Resolution Foundation predicts that 1.3 million more people will be plunged into absolute poverty by 2023. Including the 700,000 who fell into poverty during the pandemic, that’s around 16.5 million people.

What causes poverty?

Life events, like illness or redundancy, can cause poverty. But it is mostly caused by structural issues, 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.

With rapidly rising inflation, families on universal credit will be even worse off. Payments are rising at just half the rate of inflation, which is set to rise even further this year. The Office for Budget Responsibility predicts inflation will peak at 8.7 per cent in 2022.

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.

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How has the cost of living crisis affected poverty?

Although benefit boosts during the pandemic, such as the universal credit uplift, contributed to a drop in poverty in 2020/2021, the Resolution Foundation says that this has largely been undone.

The cost of living crisis, fuelled by stagnating wages, Brexit, global oil price fluctuations, the pandemic, and the war in Ukraine, means that 1.3 million people are expected to fall into poverty by April 2023, when tax hikes are set to kick in and the cost of energy will rise by 54 per cent.

In April, 6.8 million adults had smaller meals than usual or skipped meals because they couldn’t afford or get access to food, according to the Food Foundation. A total of 2.4 million adults had gone a whole day without food because they could not afford to eat.

According to the Joseph Rowntree Foundation, the crisis is set to ‘devastate the budgets of families on the lowest incomes’: low-income households will spend around 18 per cent of their income (after housing costs) on energy bills after April – compared to 6 per cent for middle-income households.

Single parent families will also feel the brunt of the crisis. Already, new research from Gingerbread, carried out by Savanta ComRes, showed that 29 per cent of the UK’s 2 million single parents have had to cut back or go without food and meals for themselves, compared with 15 per cent of UK adults.

Meanwhile, more than a third of single parents (36 per cent) have had to cut back or go without heating, compared with 21 per cent of UK adults.

What is in-work poverty?

The problem is not exclusive to unemployed people. In-work poverty hit a record high just before the pandemic. A 2021 analysis by the Institute for Public Policy Research IPPR think tank found that London has an in-work poverty rate of 22 per cent – the highest in the country.

The chances for households with two full-time workers of being pulled into poverty have more than doubled from 1.4 per cent to 3.9 per cent over the last two decades. Low pay, soaring living costs, a weak social security system and costly childcare can all trap people in poverty despite being in work.

The IPPR revealed one in six working households face poverty. The UK’s relative poverty rate among working households has hit a record high this century of 17.4 per cent. Couple households with one full-time earner have a poverty rate of 31 per cent, almost as high as working households where nobody works full time.

According to the Resolution Foundation, couple households with two workers could see their real income drop by £392 by September 2022, while a single parent working 20 hour a week could see their income drop by £584 due to the £20 cut to universal credit, rising living costs and the national insurance hike.

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.”

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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. This is worsened by soaring fuel bills amid the energy crisis which campaigners said could force people to choose between heating their homes and eating.

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. 

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.

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 2020, the government introduced a £20-a-week increase to universal credit payments in response to the Covid-19 crisis. But ministers cut the benefit back to pre-Covid levels in October 2021.

Crucially, the government did not give this increase to people on so-called “legacy benefits” like employment and support allowance. The 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.

Following the chancellor’s Spring Statement in March, campaigners urged the government to increase universal credit in line with inflation while Labour has called on the government to introduce a windfall tax on oil and gas companies to protect households from soaring energy prices.

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.

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