Why you should care
Despite faster wage growth, Britain’s kids may see a darker future, according to one estimate.
Cuts to U.K. government spending on benefits and anemic economic growth could produce record levels of child poverty by the end of the current Parliament, the Resolution Foundation has warned.
The report produces forecasts of British living standards using figures from the Office for Budget Responsibility and projections based on the effects of government policies.
In its annual Living Standards Outlook, the think tank said the combination of factors meant that …
A majority of British children in single-parent families and in families with more than two children could be living in poverty — defined as an income of less than two-thirds of the household median — by 2024.
The 2019 outlook concluded that after two years of economic growth of close to zero, the household income of typical working-age families was unlikely to rise over the coming two years.
Adam Corlett, a senior economic analyst for the Resolution Foundation, says that typical U.K. households have already taken a $1,900-a-year hit to their incomes compared with projections made ahead of the 2016 Brexit referendum.
“There’s now a huge risk that their incomes stagnate over the next few years, as the economy’s pay performance struggles to get out of first gear,” Corlett says.
He adds that the outlook for low and middle-income families is “particularly tough.”
The report found that the proportion of children in working households living in poverty was likely to rise to 29 percent by 2024. It averaged 20 percent between 1996 and 2014. If housing costs are included, the proportion of children living in poverty is set to rise to 37 percent, above the previous high of 34 percent in the early 1990s.
The think tank said its projected poverty levels were due to the failure of nominal pay growth to recover to prefinancial crisis levels of 4 percent. Pay growth reached 3 percent year-on-year in late 2018, but barely increased over the past decade.
According to the report, the effects of low pay growth for some of the hardest-hit groups were exacerbated by the effects of government benefit cuts. These include the rollout of the Universal Credit welfare reform, which reduces payments to some groups; the four-year freeze on the level of some benefits introduced in 2016; and the limiting of benefit payments for families with more than two children.
Corlett says the U.K.’s current economic outlook is “highly uncertain.” But, he continues, “Whatever direction the economy takes, the government must reassess the continuation of working-age welfare cuts. Otherwise, its non-Brexit record risks being stained by a return to record levels of child poverty.”
A government spokesman defends its record, saying that since 2010 it has introduced the National Living Wage, doubled the amount of free childcare for 3- and 4-year-olds and cut taxes for many people. The spokesman also points out that unemployment rates are at their lowest in decades and wages are growing at their fastest rate since the financial crisis.
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