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04.12.2017

700,000 More Children and Pensioners in Poverty

The number of children and older people experiencing relative poverty has risen steadily for the first time in 20 years, according to findings from the Joseph Rowntree Foundation (JRF).

The research charity found that, in the past four years, an additional 700,000 pensioners and children have fallen into relative poverty. Households experiencing relative poverty have an income, after housing costs, of less than 60% of the UK median, so it is a useful statistic for working out levels of financial inequality. JRW found that 300,000 additional pensioners, and 400,000 additional children, were living in relative poverty in the UK compared to 2012-2013 levels.

Distribution

Despite being one the richest countries in the world, wealth in the UK is far from evenly distributed. According to data from the Institute of Fiscal studies, one in five UK citizens live in relative poverty. Rates of poverty are consistently higher among households in which one member has a disability – 34% of working-age households in this category experience relative poverty compared to only 27% of UK households overall. Ethnic minorities are also disproportionately affected by relative poverty in the UK. This inequality is bad news for levels of personal debt. The JRF study discovered that more than two million of the UK’s poorest households are in the grip of “problem debt”. If these trends continue, we could see a spike in the number of people using debt solutions such as IVAs and Trust Deeds.

These revelations also demonstrated that in-work poverty is on the rise. Unemployment has been consistently decreasing in recent years; rates of poverty have not. Of people in the UK living in poverty, roughly half now live in households where at least one person is employed. This has been blamed by some on the emergence of the ‘gig economy’, and the number of people stuck in part-time or low-paying jobs without scope for progression. JRF also found that 40% of working-age adults in poverty have no qualifications, suggesting that many employers are failing to support their workers’ training and development.

These levels of poverty don’t bode well for the future. Since 70% of workers in the poorest fifth of the population are not contributing to a pension, they will likely be even worse off when they reach retirement age. As well as this, the fact that home ownership is becoming basically unachievable for more and more people means that housing costs are also likely to get higher for older people of the future, since a greater proportion of them will be living in rented accommodation.

Causes

The current government has faced a significant portion of the blame for the inequality suggested by these findings. In response to the study, Liberal Democrat leader, Vince Cable, suggested that “the Government’s policies are worsening inequality and hitting the poorest in society hardest”. Policies including years of freezes and cuts to both benefits and public-sector pay have been partly blamed by JRW for the historically high levels of relative poverty which the report revealed.

Another potential trigger has been the ever-rising cost of living. For most of the past five years, the effects of inflation have disproportionately affected the lowest-earning segments of the population, according to the Office for National Statistics (ONS). Between 2012 and 2016, the poorest 10% of UK households encountered a rate of inflation 0.5% higher than the overall population. Inflation rates can vary between groups because of their differing buying habits. The extra squeeze inflation has placed on the poorest may be partly responsible for the increase in relative poverty in working families.

The cost of childcare may also be a factor contributing to the rising levels of child poverty in the UK today. Although the government provides some free childcare, this is sometimes inadequately subsidised, driving up costs for non-eligible parents. It was recently revealed that, in many cases, hourly pay falls below the cost of care, meaning low-income parents sometimes cannot afford to work.

Responses

Over the weekend, key members of the Social Mobility Commission quit, citing the lack of progress and decision-making on the part of the government as their reason. The former chair, Alan Milburn, complained of “indecision, dysfunctionality, and lack of leadership” on the part of Theresa May’s administration.

Frances O’Grady, General Secretary of the TUC, has used JRF’s report to call for the UK minimum wage to be raised to £10 per hour, to adjust for the inflation and frozen wages of the recent past. This would be especially beneficial to the increasing number of children being affected by relative poverty. Oxfam have also responded to the report; Rachael Orr, head of UK programmes, commented that “It’s not just working adults who are affected, but their children too, and it’s a real worry to see progress on child poverty going in reverse”.

JRF recommends tackling rising child and pensioner poverty by unfreezing benefits, increasing the training available for adult workers, and building more affordable housing. By improving government support for low-income workers and facilitating career progression and the affordability of housing, Campbell Robb, Chief Executive of JRF, hopes that the trend of decreasing poverty among our most vulnerable groups can be restored.

If you need more information about the options available to you in dealing with your debt, you can always speak confidentially with one of our friendly advisors on 0808 2085 198.

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