Getting the measure of deep poverty in the UK
Declining poverty rates should offer little comfort to those concerned about the cost-of-living-crisis. Deep poverty has grown over the last 25 years and will continue to do so if the government doesn´t learn lessons from its response to COVID-19.
Official poverty statistics were recently published that show a reduction in rates of relative poverty during the first year of COVID-19 in the UK. This continues a long-standing trend of official poverty statistics being out of step with the dramatic socio-economic shocks and upheavals affecting lowest income households the most. The problem is that the government’s main measure of poverty is set at a threshold (of 60% below median incomes) that tells us more about what’s going on for average earners than it does about the living standards of those towards the very bottom of the income distribution.
To explore what’s going on beneath the poverty line, analysts and commentators have become increasingly concerned about the changing depth of poverty in high-income countries. But there is little consensus about what we should be measuring or doing about it. In the UK, there are at least 5 measures of deep poverty currently in circulation. These capture varying degrees of hardship with little rationale for a particular cut-off or level chosen. Despite this, all tell a similar story. Deep poverty – whichever way you choose to measure it – has increased considerably.
Over the last 25 years, the number of people falling below the relative poverty line in the UK has increased by 7.5%, but the number falling more than 50% below this line has jumped by 52.5% (from 2.6 to 4.1 million). Distributional analysis also suggests a splintering in the economic fortunes of those falling below the relative poverty line with women, children, larger families, Black people and those in full-time work worst affected.
Over this same period, public spending on social security has steadily grown reaching around 12% of GDP and hitting its highest levels of around £250 billion last year. Most of this growth is attributable to pensions but expenditure on certain working-age benefits has also grown. The fact that this has occurred alongside an increasing depth of poverty underlines a central contradiction in the UK welfare settlement. As a liberal welfare regime, the UK is supposed to be focused on a more targeted, means-tested social security ideal - concerned much less with redistribution and more with poverty alleviation for those on low incomes.
Even at its least ambitious though, the UK welfare state has become increasingly ineffectual at protecting the most financially vulnerable. For example, the number of people pulled into destitution is estimated to have grown from 1.3 million to 2.4 million since 2015. This is despite considerable public social spending and commitments from successive UK governments to eliminate or reduce poverty. At a very basic level, our social security system is failing to protect the livelihoods of those who already have the least. Other approaches to poverty alleviation such as the Dibao system in China offer potential lessons on how to improve the effectiveness of targeted provisions for those on the lowest incomes.
Underlining issues of adequacy within the UK benefits system, food insecurity, debts and financial strain are widespread amongst benefit claimants. Announcements made (or a lack thereof) in the Spring Statement last month will exacerbate this trend. A real terms cut to the value of working-age social security will widen the gap further between entitlement, need and receipt for those struggling most with the cost-of-living crisis. It remains to be seen how the government will respond in the Autumn but there is still time yet to address this: to make the social security system more effective at protecting against the deepest forms of poverty in the UK today.
The £20 uplift to Universal Credit and Working Tax Credit was set at a flat rate but was particularly effectiveat helping some of the lowest income households weather the storm during COVID-19. Those in deep poverty were most likely to be negatively affected by income or job loss during the pandemic and new evidence published by the Office for National Statistics suggests the drop in original income was partially offset by measures such as the £20 uplift. As we wait for the full data release of the Family Resources Survey and Households Below Average Incomes, it remains to be seen what the full effect of the introduction (and subsequent withdrawal) of the £20 uplift has had on deep poverty. Even when it is published, there is considerable uncertainty around the quality of income data and the inferences that can be drawn given the extraordinary challenges surrounding data collection during the pandemic.
What we do know though is that the £20 uplift disproportionally benefited those on the lowest incomes. During the first year of the pandemic, the average amount of cash benefits received by the bottom income group (decile) jumped from 44% to 50% of average gross incomes. As we head into a new crisis of living standards that stands to affect the lowest income households most, the same commitment to protecting those in the deepest forms of poverty is needed.
Policy measures recently announced to help households struggling with the rising cost of food, energy and housing (such as raising the National Insurance threshold and the £150 Council Tax Rebate) are poorly targeted and fail to prioritise public resources where they are most urgently needed. The Spring Statement was a missed opportunity to learn lessons from the pandemic… that a boost to targeted, working-age social security can make a substantive difference to those on the lowest incomes. The fact that the government’s main measure of low incomes has gone down should offer little comfort and will make it harder to hold the government to account without further attention to the changing depth of poverty.
Originally published in The Conversation.