In-work poverty hits record levels

The economic recovery has helped to stop poverty rates from rising higher, with overall poverty levels remaining flat compared to 2010. But the new report finds that there is growing insecurity underneath positive economic headlines. Since 2010/11, when the economic recovery began, in-work poverty has increased by 1.1 million people.

The rise is being driven by the UK’s housing crisis, particularly high costs and insecurity in the private rented sector (PRS). The report finds that:

• The number of people in living in poverty in the PRS has doubled in a decade, from 2.2 million people in 2004/5 to 4.5 million people today.
• Almost three quarters (73%) of people in the bottom fifth of the income distribution and living in the PRS pay more than a third of their income in rent. This is compared to 28% of owner occupiers and 50% of social renters with similar income levels.
• Half of children living in rented homes (46% in the PRS and 52% in the social rented sector) live in poverty.
• There are 3.8 million workers living in poverty in the UK today, one million more than a decade ago. This is equivalent to 12% of all workers in 2014-15.
• Once account is taken of the higher costs faced by those who are disabled, half of people living in poverty are either themselves disabled or are living with a disabled person in their household.
• Insecurity for renters has risen since 2010, with the number of evictions by a landlord rising from 23,000 in 2010/11 to 37,000 in 2015/16. Over the same period, mortgage repossessions have fallen from 23,000 to 3,300.

The report highlights the difference in poverty levels across different regions of the UK. More than half of people in poverty in England live in London and southern England (the East, the South East and the South West), and the capital has the highest poverty rate at 27%, 6% above the UK average.

Positive news on economic growth and employment may have helped to avoid poverty rates rising higher overall. The report finds:

• The 16-64 employment rate is at the highest level ever, at 74.5%, and the number of unemployed people has fallen to 1.6 million people, the lowest since 2007.
• The number of children living in a workless household has continued to fall and is now at 1.4 million, the lowest figure on record.
• 62% of people in employment in 2016 are in full-time employee jobs, the same percentage as in 2010. Underemployment has fallen for the fourth consecutive year to five million.

Helen Barnard, Head of Analysis at the Joseph Rowntree Foundation, said: “The UK economy is not working for low-income families. The economy has been growing since 2010 but during this time high rents, low wages and cuts to working-age benefits mean that many families, including working households, have actually seen their risk of poverty grow.

“As it negotiates Brexit, it is vital that the Government does not allow its focus to slip from the domestic concerns that make a huge difference to people who are just about managing. This report shows that people on low-incomes cannot rely on economic growth and rising employment alone to improve their financial prospects. Families who are just about managing urgently need action to drive up real-term wages, provide more genuinely affordable homes and fill the gap caused by cuts to Universal Credit, which will cost a working family of four almost £1,000 per year.”

Dr Peter Kenway, director of the New Policy Institute added: “An adult in poverty today is much more likely to be young, working and a tenant living the private rented sector than 15 years ago. But modern poverty is also increasingly linked with disability. After allowing for the higher cost of living, half of those in poverty today are either sick or disabled themselves or live with someone else who is.”

In the recent Autumn Statement, the first under the current administration, Chancellor of the Exchequer Phillip Hammond took welcome action to invest in housebuilding, boost productivity and reverse some cuts to the benefits system by adjusting the Universal Credit taper. However, the Government could do more to help people who are just about managing to make ends meet by diverting the £2 billion it is planning to spend on raising the income tax threshold and the higher rate tax allowance so that it does more to help people who are just about managing. Eighty five per cent of the money spent on these two changes will benefit people with above-average household incomes.

To reduce poverty, JRF is calling for the Government to:

• Reverse cuts to the Work Allowance, which currently mean that many families will be considerably worse off even after changes to the income tax threshold and Universal Credit taper are taken into account. A lone parent with two children working on the National Living Wage (NLW) will be £2,600 worse off, while a family of four with both parents in work on the NLW will be almost £1,000 worse off.
• End the freeze on working-age benefits so that they can rise in line with inflation. The OBR predicts that inflation will rise to above 2% next year, putting pressure on the budgets of low income families if they do not see similar increases in wages and the value of social security.
• Make sure that people in low-paid work feel the benefits of action to solve the UK’s productivity crisis by extending plans to include low-wage sectors like retail, hospitality and care. These account for 24% of UK jobs but for a third of the productivity gap with other European countries and a targeted plan to support these sectors is vital to closing the gap and raising wages.
• Build on welcome action to cut costs for renters and build more homes by investing £1.1 billion extra a year in affordable housing through a Living Rents scheme. This would deliver 80,0000 genuinely affordable homes each year, link social rents to local wages, making them genuinely affordable to people earning the National Living Wage, and cut the Housing Benefit bill in the long term.
• Support regional growth by earmarking at least an equivalent level of funding to the European Structural and Investment Funds (ESIF) to create a Rebalancing Fund. Leaving the EU creates an opportunity to design a regional policy that responds to local priorities and opportunities.

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