Another Year in Paradise
More than one in five people have met the government's definition of poverty every year since 1994.
There’s a home furnishings shop near where I live that is having a ‘2019 sale’. Prices on selected items are reduced by 25-30%, bringing them down to where they were in 2019.
That’s a pretty depressing example of the impact of high inflation over the past couple of years. ‘Sticker shock’ is getting pretty commonplace, from the cost of your weekly shop to the cost of a round of drinks (how much!?). It turns out even high-end curtains are subject to eye-watering price rises.
Rising prices have quickly eaten in to how far our money takes us. Elevated interest rates, sticky inflation and the potential impact on energy costs of both enduring and fresh global volatility mean that the home furnishings shop will need to plan an even bigger discount next year.
But although upmarket upholsterers might be longing for the sepia-tinged days of 2019, it wasn’t a stellar year for everyone. That year, in the UK, 22% of people (including children, working age adults and pensioners) were in poverty. A decade earlier (2009), it was also 22%. A decade before that (in 1999) it was 24%.
Below is this edition’s very dull (and very depressing) chart.
The data is from the Family Resources Survey and is produced as part of DWP’s annual Households Below Average Income (HBAI) analysis. It offers several definitions of poverty, the most widely used of which (and the one used here) is the proportion of households earning less than 60% of median income, after housing costs. However, no other measure in the report (you can download the full dataset here) tells a different story – the proportion of people in poverty over the past thirty years (since 1994/5, when HBAI was first produced) is largely unchanged.
Or at least, it hasn’t changed for everyone. As ever, there are currents below the surface.1
Between the mid-90s and the mid-00s there was progress in reducing poverty amongst children, working age adults with children, and pensioners.
In 1996/7 34% of children were in poverty. By 2004/5 that had dropped to 28%. It rose again during the recession, but between 2010 and 2013 was at its lowest ever level, 27%. By 2019/20 it had risen again, to 31%.
Pensioners have seen lasting reductions in poverty. In the 1990s, just under 30% were in poverty. This almost halved (to 16%) by 2005/6. The most recent peak, in 2019/20, was 18%. Overall, pensioners are much better off than they were a decade ago.
Poverty fell during the pandemic, likely as a result of the extra support put in place. For the population as a whole it dropped to 20% in 2020/21, but then returned to 22% the year after.
This measure of poverty, and others produced by HBAI, are relative – they count the proportion of people earning less than a set amount, which rises and falls based on the median income. It would be possible for the incomes of everyone to rise and for there to be no relative change in poverty. But other indicators, like this one, from the World Bank, which counts the proportion of people living on an equivalised $30 a day, has also seen no change in recent decades (although the data only goes to 2017). In 2007, 32% of the UK lived on less than $30 a day. In 2017, it was 31%.
The impacts of the cost of living crisis on these trends are yet to be seen. The next edition of HBAI will be published in March and will cover the period 2022/23. In it, we should expect to see a rise in the proportion in poverty. If data like the chart below from Citizens Advice is any indicator, it will be a substantial one.
What does this mean?
That one in five people meeting the UK’s definition of poverty appears to be an unchanging constant. It’s been true for 30 years and is likely to remain true for the foreseeable future. This affects the purchasing power of consumers, demands on government spending and public services, and the resources of charities.
The data rises and falls based on both macro-economic trends and political decisions. The triple lock has helped prevent rises in pensioner poverty, while closures of Sure Start centres and the two-child benefit cap have contributed to sustained rises in child poverty.
The cost of living is a chronic crisis, not an acute one. Need is likely to be elevated at the moment, due to the impacts of persistent high inflation – but even when inflation falls, poverty will remain a widespread feature of the UK landscape.
Poverty and social need are not currently high priorities for the UK public (our regular polling has inflation, the NHS, the economy and immigration as key issues). That could change as high inflation does long term damage to household finances.
Increasing – or just high levels being maintained - hardship in the UK makes need elsewhere in the world seem more remote. Charities focussing on overseas aid (of which there is no shortage of need or urgency) may be squeezed as a result.
Throughout the Cost of Living Crisis, Trajectory have been tracking the impact on communities, individuals and households. Our segmentation of the 17.5m financially vulnerable consumers across the UK (alongside CACI for Fair4All Finance) was recently shortlisted for the MRS New Consumer Insights award.
The JRF has produced an excellent chart tracking trends in poverty by group, which you can access here.