By Mark Smulian | 11 October 2011
Poverty is set to worsen as the beneficial effects of the introduction of Universal Credit are negated by other welfare changes, the Institute for Fiscal Studies said today.
It forecasts that about 800,000 more working-age adults and 600,000 children will experience poverty in 2009–2013 as average incomes fall by around 7% in real terms, the largest three-year fall for 35 years. This would more than cancel out the positive impact of the Universal Credit, which would reduce the numbers in poverty by about 600,000 working-age adults and 450,000 children by 2020/21.
The think-tank's report, Child and working-age poverty from 2010 to 2020, assesses the impact of the Universal Credit and other changes planned by Work and Pensions Secretary Iain Duncan Smith. It finds that switching indexation of benefits from the Retail Prices Index to the more restricted Consumer Prices Index would ‘more than offset the impact on poverty of the Universal Credit’.
The IFS highlights the targets set in the Child Poverty Act 2010, passed by the previous government, for no more than 5% of children to be in absolute poverty by 2020/21 and 10% in relative poverty.
The Act defines relative poverty as a household income below 60% of the median in any year and absolute poverty as household income below 60% of the 2010/11 median figure, adjusted for inflation.
The IFS said these targets would be dramatically missed and that by 2020/21 23% would be in absolute and 24% in relative poverty.
James Browne, one of the report’s authors, said child poverty fell by almost a quarter between 1998 and 2009 but that had still not allowed the Labour government to meet its targets.
‘Even if there were an immense increase in the resources made available, it is hard to see how child poverty could fall by enough to hit this supposedly legally binding target in just nine years,’ he said.
‘If the government disagrees, then it should set out concrete suggestions about how it will achieve the targets.’
Alison Garnham, chief executive of Child Poverty Action Group, said: ‘Ministers seem to be in denial that, under current policies, their legacy threatens to be the worst poverty record of any government for a generation. ‘It would be a catastrophic failure in public policy and political leadership.’
But the Department for Work and Pensions said the welfare reforms would have a ‘dynamic impact on some of the poorest families’.
A spokesman said: ‘Over the last decade billions of pounds have been moved around the tax and benefit system in an attempt to address poverty. This has had the perverse effect of trapping thousands of families on benefits while income inequality increased to its highest ever level. It is clear that sticking with the status quo, which has had no meaningful long-term effect on poverty projections, is not an option.’
