Income and Poverty

New national report on poverty

  • Published: Dec 01, 2011
  • Authors: Hannah Aldridge, Tom MacInnes
  • Category: Income and Poverty

Our latest Monitoring Poverty and Social Exclusion Report shows that the Government’s anti poverty strategy cannot succeed without the creation of millions of jobs. Worryingly, the Chancellor’s autumn statement shows that the economy is heading in the opposite direction

Today saw the publication of our 14th annual Monitoring Poverty and Social Exclusion Report. The most recent data on poverty is for 2009/10 and allows us to present a complete picture of the progress made under the Labour government and the situation inherited by the Coalition.

In 2009/10 the proportion of children living in poverty fell to 29%, the second fall in two years – and this came during a recession. Labour’s main poverty success story was actually the reduction in the pensioner poverty rate which at 16% around half the rate in 1997.

In contrast, the picture for working age adults, particularly those without children, is bad. Their rate of poverty has been increasing throughout the last decade reaching 20% in 2009/10. Moreover, once in poverty they are more likely to be in deeper poverty than other age groups. 

Looking further at poverty by age group the report shows around 28% of people aged 16-24 are in poverty, much higher than any older age groups. Such a figure shows the severe limitations of having an anti-poverty strategy that is exclusively targeted on children. Once a child leaves school their poverty status is no longer a priority for the government yet their risk of poverty remains high. 

Another example of a neglected group are older working age adults. People aged 55- 64 are now more likely to be in poverty than those aged 65-74. This is a reversal of the position ten years ago and has come about because tax credits for older people are more generous than out of work benefits for those of working age.  This means that for some, the best hope of escaping poverty is to hang on for their state pension. 

The Government now has a Child Poverty strategy and that is obviously welcome.  But by focussing on children, the Government risks repeating the mistakes of its predecessor and ignsoring poverty among working age adutls.  A comprehensive anti-poverty strategy thatcovers the whole population is what is needed.

One of the major issues highlighted in the 2011 Monitoring Poverty and Social Exclusion is the fundamental lack of paid work. Unemployment, which currently stands at 2.5m (and the Office for Budget Responsibility expect it to rise to 2.8m next year) is only one part of the story. When we look at underemployment – people wanting to work but not currently looking for work, those working part time because they are unable to find full-time work as well as those officially unemployed – we see that there are some 6m people lacking the paid work they want. 

The sheer scale of this is yet to be recognised by either the Government or the opposition. The level of underemployment shows that it is not the absence of “work incentives” – the ability to earn more through employment than through benefits - that prevents people from finding work: it is the absence of work itself.

With in-work poverty high and under-employment increasing it is clear that the Government can no longer depend on reforms to the benefit system to end poverty and unemployment. In the same way that Labour focussed on tax credits as the means to make work the route out of poverty, the Coalition is focussing on Universal Credit. But this places too much weight on the benefit system and ignores the job market entirely. We need a huge number of jobs that provide sufficient earnings to lift families out of poverty.

But the Autumn Statement and the Office for Budget Responsibility’s predictions show that we are heading in the diametrically opposite direction. Unemployment is predicted to rise to 2.8m next year. Freezing tax credits at a time when inflation is running at 5% will leave the low income families poorer than before. The Treasury’s own estimates indicate a rise in child poverty of 100,000 (see the distributional impact tables for the Autumn Statement here)

And just as the focus on children leaves young adults out in the cold, so the focus on pensioners, combined with the increase in the state retirement age, is deepening the now growing poverty among those in their 60s. This is a group who, until last year, would have been able to claim the more generous pension credit at 60. Someone who turns 60 in just three years time will have to wait until they are 66. For those born in the 1960s, the Autumn Statement extended the wait to 67. This simply makes a growing problem worse.

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