Helen Barnard: Why economy must work for all as UK leaves the EU

After falls over the last two decades, Britain’s record on tackling poverty has reached a turning point and is at risk of unravelling following the first sustained rises in child and pensioner poverty.

Across the UK, almost 400,000 more children and 300,000 more pensioners are now living in poverty than in 2012/13. These worrying figures come in our state of the nation report, UK Poverty 2017, which examines how low-income families are faring in modern Britain.

It paints a troubling picture and should act as a warning that our record is in peril.

It’s worth reminding ourselves why this matters so much, and about the progress we have made.

Twenty years ago, a third of children lived in poverty; this fell to 27 per cent in 2011/12. In 1994/95, 28 per cent of pensioners lived in poverty, falling to 13 per cent in 2011/12. These falls were achieved by higher employment rates; more generous support for families through tax credits; and extra help for poorer pensioners.

Following the financial crisis, poverty rates remained stable. A combination of stronger than expected employment; tax and benefit policies which continued to support working and non-working households; and spells of low inflation helped negate the worst effects of the downturn for the least well-off families.

But changes to welfare policy – especially since the 2015 Budget – are reducing families’ financial breathing space, with wage growth at the bottom end of the labour market failing to make up the difference. Poverty rates rose last year – to 16 per cent for pensioners and 30 per cent for children – and this suggests gains are at risk of being lost without immediate action.

Some 14 million people live in poverty in the UK – over one in five of the population. Just over a million of those people (1,160,000) live in Yorkshire, unable to make ends meet and facing terrible choices on a day to day basis. This includes 330,000 children and 140,000 pensioners.

We know new threats are emerging to people on low incomes. More people are trapped in in-work poverty and are unable to progress. Across the country, one in eight workers, 3.7 million people, live in poverty and 40 per cent of working-age adults with no qualifications are living in poverty – facing a barrier to work or better pay.

The housing crisis and rising rents means a struggle to afford a home. Almost half on the lowest incomes (3.2 million working-age people) now spend more than a third of their income on housing. Falling homeownership means that, in the future, more older people are likely to rent and have higher housing costs in retirement.

The cost of other essentials are also rising. Since 2003, people in the poorest fifth of the population have experienced a higher rate of inflation than the rest of the country in every year except 2010. Food and energy bills take up a larger share of incomes, leaving people on low incomes with little room for manoeuvre when prices rise.

And all this might explain why people are falling behind with bills and are unable to put away for a secure future. It is estimated 2.2 million of the poorest households have ‘problem debt’ and 70 per cent of people in work in the poorest fifth of the population are not contributing to a pension (around 2.3 million people).

Like the gains we have made before, we know something can be done to make life better for thousands of families across the country. The starting point must be to ease the strain on household budgets, which are being squeezed by the four-year freeze on working-age benefits and tax credits. The freeze is the single biggest policy driver behind rising poverty, hitting families in and out of work, and ending this should be prioritised over increases in the personal tax allowance to help low-income families, which do little to help the worst-off.

Next, we must ensure everyone can find a decent, secure, affordable home. The Government announced plans to build 300,000 homes a year at the Budget. But the crux of this house-building programme must be whether it provides 80,000 new genuinely affordable homes to rent and buy every year that are in the reach of low income families.

And we could use the industrial strategy to rebalance the economy, ensure people trapped in low paid work in Yorkshire have the skills to progress and support firms to boost their productivity and create more and better jobs for people living here.

As we prepare to leave the EU, we have to make sure that our country and our economy works for everyone and doesn’t leave even more people behind. But as Alan Milburn warned this week when resigning from the Government’s Social Mobility Commission, there are very real dangers from overlooking burning injustices and allowing poverty to rise again. Our report shows there are a million reasons why we can’t let this go on.

Helen Barnard is head of analysis at the Joseph Rowntree Foundation.