Poverty and inequality set to rise, IFS analysis reveals

16 Mar 17

Child poverty in the UK is likely to increase over the next few years because of benefit cuts, according to the Institute for Fiscal Studies.

The period since the recession has seen a historically slow growth in average incomes, the think-tank says in an analysis of government figures on household incomes published today.

Agnes Norris Keiller, a research economist at the IFS, said: “Growth in household incomes in 2015-16 was modest but widespread, continuing the pattern seen in recent years.

“The period since the recession has been defined not by sharp rises in inequality or poverty, but historically slow growth in average incomes – in 2015-16 average income for working-age adults was no higher than eight years previously.”

The average household now takes home £481 a week, which means, on average, households are seeing an extra £300 added to their income every year, compared to 2014-15, the Department for Work and Pensions stated as it released last year’s figures.

Work and pensions secretary Damian Green said: “It’s good news that household incomes are at a record high and it shows we have a strong economy.”

But Adam Corlett, economic analyst at the Resolution Foundation think-tank said: “It is the outlook for living standards, rather than the past, that is particularly concerning for low and middle income households.”

“Looking to the future, with over £12bn of welfare due to be rolled out over the course of the parliament, the risk is that sluggish income growth is combined with the first major increase in inequality since Margaret Thatcher was in Downing Street.”

Norris Keiller added: “Inequality and poverty actually remained slightly lower than before the financial crisis.

“However, large planned benefit cuts mean child poverty is likely to rise over the next few years.”

The DWP data showed the median household net disposable income before housing costs increased by £8 per week between 2014-15 and 2015-16.

The percentage of children living in relatively low-income households before housing costs increased by one percentage point from 2014/15, rising to levels last seen in 2009/10, the DWP statistics showed. 

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