Millions of people in UK would need to double their income to escape poverty, new report warns
Millions of Britons would need to more than double their income to climb out of poverty, according to a new report criticising “social failure at scale”.
According to the Joseph Rowntree Foundation, six million people were in very deep poverty in 2021-22 – 1.5 million more than 20 years ago.
This means they received less than 40% of the country’s median (middle) income after housing costs.
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These people would need an additional £12,800 a year to reach the poverty line, which is defined as 60% of median income.
Giving an example of a couple with two children under 14 living in poverty, JRF suggested the average income for this type of family after housing costs was £21,900 – and they would need an extra £6,200 yearly just to reach the poverty line.
In the mid-1990s, the gap was £3,300 after adjusting for inflation.
The JRF has warned that the poverty gap – the amount of money needed to bring the incomes of those in poverty to the poverty line – has widened.
In 2021-22, 22% of the population (14.4 million people) were in poverty in the UK – including 8.1 million working-age adults, 4.2 million children and 2.1 million pensioners.
This equates to two in 10 adults, and three in 10 children.
People have been increasingly reliant on food banks – especially this winter
There are many reasons why people are stuck in poverty – including illnesses or redundancies – but according to the Big Issue, “structural and systemic issues” worsened by increasing living costs create a “cycle that keeps people trapped” in hardship.
The JRF showed that poverty rates grew rapidly under Margaret Thatcher’s administration in the 1980s and remained high, with small decreases in following governments.
Its report urged political parties to include an essentials guarantee in Universal Credit, ensuring people always have enough to cover “life essentials like food and energy”.
Former prime minister Gordon Brown recently told Sky News that Universal Credit was “not working” and needed to be addressed after citing families unable to afford fundamental housing appliances and forgoing basic hygiene products like soap and toothpaste due to the cost of living crisis.
The Trussell Trust network, which supports more than 1,300 food bank centres across the UK, had forecast that more than 600,000 people would rely on food banks from December until February this year.
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Paul Kissack, JRF group chief executive, confirmed families were spiralling deeper below the poverty line.
He said: “Little wonder that the visceral signs of hardship and destitution are all around us – from rocketing use of foodbanks to growing numbers of homeless families.
“This is social failure at scale.”
Mr Kissack said political parties must set out their plans to “turn back the tide on poverty” as the country approaches a general election.
Consumer champion Martin Lewis said the “stark reality” was that people’s incomes were less than their minimum necessary spend, despite help from money charities.
He said the JRF report must prompt policymakers and regulators to “sit up [and] take note and address these deep-rooted problems”.
A government spokesperson said: “We are continuing to support families with the cost of living backed by £104bn – and there are 1.7 million fewer people living in absolute poverty, including 400,000 children, compared to 2010.
“Children are five times less likely to experience poverty living in a household where all adults work, compared to those in workless households.”
The spokesperson added that taxes have been cut and inflation is being curbed “so hard-working people have more money in their pocket”.
Winter fuel payments will extend to everyone over the state pension age with an income of or below £35,000 a year, Chancellor Rachel Reeves has announced.
The Treasury said the change will cost around £1.25bn in England and Wales but still save £450m if the universal allowance had been kept.
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Dropping the benefit for all pensioners was one of the first things Labour did in government, despite it not being in their manifesto.
The change meant only those on pension credit or other benefits were eligible – a deeply unpopular move that was widely blamed on the party’s poor performance in May’s local elections.
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Ms Reeves said: “Targeting winter fuel payments was a tough decision, but the right decision because of the inheritance we had been left by the previous government.
“It is also right that we continue to means-test this payment so that it is targeted and fair, rather than restoring eligibility to everyone, including the wealthiest.
“But we have now acted to expand the eligibility of the winter fuel payment so no pensioner on a lower income will miss out.”
The government signalled its intention to widen eligibility last month, but no detail was given on what the new threshold might look like.
The lack of clarity threatened to overshadow Ms Reeves’ spending review on Wednesday, when she will set out what funding has been allocated to each government department over the next three years.
The chancellor repeatedly faced questions on winter fuel during a speech in Manchester last week to promote a £15.6bn funding settlement for local transport projects, when she said changes would be in place for this winter.
However ministers still could not give further detail, with Science Secretary Peter Kyle telling Sky News on Sunday that the new eligibility would be set out “in the run up to the autumn”.
It is still not clear how the new policy will be funded, with the costs to be accounted for in the autumn budget.
Asked by Sky News’ deputy political editor Sam Coates if the change is a signal to markets that she can’t say no to her MPs, Ms Reeves said after her spending review “markets and the public will be able to see public services living within their means”.
‘Humiliating U-turn’
Tory leader Kemi Badenoch said: “Keir Starmer has scrambled to clear up a mess of his own making. I repeatedly challenged him to reverse his callous decision to withdraw winter fuel payments, and every time Starmer arrogantly dismissed my criticisms.
“This humiliating u-turn will come as scant comfort to the pensioners forced to choose between heating and eating last winter. The prime minister should now apologise for his terrible judgement.”
The Treasury said that by setting the threshold at an income of £35,000, over three-quarters of pensioners – around nine million people – will benefit.
The universal system meant some 11.4 million pensioners were in receipt of the benefit, which was slashed down to 1.5 million when the initial means-test was brought in.
The new threshold is above the income level of pensioners in poverty and broadly in line with average earnings, the Treasury said.
No pensioner will need to take any action as they will automatically receive the payment this winter.
“It’s a big deal for this government,” says Simon Case.
“It’s the clearest indication yet of what they plan to do between now and the general election, a translation of their manifesto.
“This is where you should expect the chancellor to say, on behalf of the government: ‘This is what we’re about’.”
As the former cabinet secretary, Mr Case was the man in charge of the civil service during the last spending review, in 2021.
On Wednesday, Rachel Reeves will unveil the Labour government’s priorities for the next three years. But it’s unclear whether it will provide all that much of an answer about what it’s really about.
Unlike the Autumn budget, when the chancellor announced her plans on where to tax and borrow to fund overall levels of spending, the spending review will set out exactly how that money is divided up between the different government departments.
Since the start of the process in December those departments have been bidding for their share of the cash – setting out their proposed budgets in a negotiation which looks set to continue right up to the wire.
This review is being conducted in an usual level of detail, with every single line of spending assessed, according to the chancellor, on whether it represents value for money and meets the government’s priorities. Budget proposals have been scrutinised by so called “challenge panels” of independent experts.
It’s clear that health and defence will be winners in this process given pre-existing commitments to prioritise the NHS – with a boost of up to £30bn expected – and to increase defence spending.
On Sunday morning, the government press release trumpeted an impressive-sounding “£86bn boost” to research and development (R&D), with the Science and Technology Secretary Peter Kyle sent out on the morning media round to celebrate as record levels of investment.
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What will be in spending review?
We’re told this increased spending on the life sciences, advanced manufacturing and defence will lead to jobs and growth across the country, with every £1 in investment set to lead to a £7 economic return.
But the headline figure is misleading. It’s not £86bn in new funding. That £86bn has been calculated by adding together all R&D investment across government for the next three years, which will reach an annual figure of £22.5bn by 2029-30. The figure for this year was already set to be £20.4bn; so while it’s a definite uplift, much of that money was already allocated.
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Peter Kyle also highlighted plans for “the most we’ve ever spent per pupil in our school system”.
I understand the schools budget is to be boosted by £4.5bn. Again, this is clearly an uplift – but over a three-year period, that equates to just £1.5bn a year (compared with an existing budget of £63.7bn). It also has to cover the cost of extending free school meals, and the promised uplift in teachers’ pay.
In any process of prioritisation there are losers as well as winners.
We already know about planned cuts to the Department of Work and Pensions – but other unprotected departments like the Home Office and the Department of Communities and Local Government are braced for a real spending squeeze.
We’ve heard dire warnings about austerity 2.0, and the impact that would have on the government’s crime and policing priorities, its promises around housing and immigration, and on the budgets for cash-strapped local councils.
The chancellor wants to make it clear to the markets she’s sticking to her fiscal rules on balancing the books for day-to-day spending.
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But the decision to loosen the rules around borrowing to fund capital investment have given her greater room to manoeuvre in funding long-term infrastructure projects.
That’s why we’ve seen her travelling around the country this week to promote the £15.6bn she’s spending on regional transport projects.
The Treasury team clearly wants to focus on promoting the generosity of these kind of investments, and we’ll hear more in the coming days.
But there’s a real risk the story of this spending review will be about the departments which have lost out – and the promises which could slip as a result.
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