Over a million more people will be in poverty this April, as new data-led analysis from Policy in Practice finds that people in the UK are all, on average, worse off compared to a decade ago.
Our analysis finds that the value of wages overall has fallen by 2% in real terms over the last decade. When this year’s inflation rate is factored in poverty is expected to rise by 8.5% this April, or 1.9 percentage points, to 24.2%.
Deven Ghelani, Director of Policy in Practice said:
The Chancellor should use the Spring statement to boost economic growth and alleviate cost of living pressures so that people can start to see their standard of living improve.
The government recognised austerity was the wrong approach to take during the pandemic and the same is now true as energy and food costs rise. We were already experiencing the highest cost of living increase in 30 years and expecting further rises, and this may now be even higher due to the war in Ukraine. Benefits are too low for people to weather the coming storm.
We’ve seen how Universal Credit can be increased rapidly. Restoring the £20 per week uplift is now the right thing to do. It would target support to almost six million low income households, and to people in low earning work and unable to work, and help almost 200,000 households stay above the poverty line.
Understanding why over a million more people will be in poverty in April
Prices (28.8%) have increased faster than both wages (25.9%) and benefits (14.2%) over the last decade, making all of us worse off.
Relative poverty rates before housing costs have risen by an estimated 3.4 percentage points since before the pandemic.
With the cost of living expected to increase further, and the expectation that household incomes will not keep up, poverty is expected to rise by a further 1.9 percentage points in the coming months. In total, this is an increase from 18.9% to 24.2% since early 2020, or a rise of 28%.
Policy in Practice’s analysis is based on London data that shows a further 185,500 households in poverty from the beginning of the pandemic to April 2022.
If the same is true for the rest of the UK, poverty will have increased by 1.5 million households in the UK from the beginning of the pandemic to mid-2022.
Around half a million of that increase will happen in the coming months, given the cost of living pressures.
Reinstating the £20 Universal Credit uplift or other policy alternatives could reduce the expected increase in poverty in the coming months by two-thirds. Indeed, better use of Universal Credit can help to tackle the cost of living crisis.
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How we created these estimates
Analysis by Policy in Practice comparing the cost of living to benefits and wage rises is based on data from the House of Commons Library projected out to 2022, and is available here.
Analysis of poverty rates is based on administrative data from 15 London Boroughs, supported by a grant from Trust for London and is available here.
Analysis of administrative data allows Policy in Practice to analyse the change over a year before the release of official statistics. Official data for 2021 is due to be announced on 31 March 2022.
Because administrative data doesn’t cover the whole population, we split the analysis into three groups. Increases in poverty rates are based on people whose incomes we can directly observe and model in the administrative data. We then extrapolate this to people on Universal Credit, assuming 10 percentage point lower poverty rates, and for the wider population we take the same poverty rates as reported in HBAI.
How organisations can help
Join our webinar, How low-income families can benefit from social tariffs, on Wednesday 30 March from 14:00 to 15:45 where we’ll be discussing our latest analysis of the cost of living crisis and how better take-up of social tariffs can support vulnerable families. We will be joined by guest speakers from Energy UK and Good Things Foundation. View details and register here.