Child poverty in Britain is set to rise for the first time in ten years, because of Tory benefit cuts and a slowdown in growth, according to new forecasts from the respected Institute of Fiscal Studies.
Low income families will fare worst, they predict, with the poorest 15 per cent predicted to have a lower income in 2021/22 than they do now.
If the IFS’s predictions are right then child poverty will rise rom 27.5 per cent in 2014/15 to 30 per cent in 2021/22.
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The think tank’s prediction will put pressure on chancellor Philip Hammond to row back on planned benefit and tax reforms when he gives his Spring budget next Thursday.
Tory plans for a four-year benefits freeze will cut the value of most working-age benefits by 6 per cent given current inflation forecasts, the IFS says, and universal credit will be less generous than what it is replacing, on average. And housing benefit is no longer designed to cover increases in rent for most recipients.
According to the IFS, the slow recovery from the crash in 2008 means that even the average UK household will, in effect, be about £5,000-a-year worse off than they should have been. The report says median household incomes will be 18 per cent lower in 2021/22 in real terms than they would have been if the pre-crash trends had continued.
This sustained slowdown in income growth in the 14 years after 2007/08 is “unprecedented in at least the last 60 years”, the IFS claim, saying that household incomes will not grow at all for the next two years and will rise by just 4 per cent over the following five years.
The grim predictions are based on Office of Budge Responsibility forecasts. And, the IFS say, even if real earnings are way better than anyone is predicting and grow by one percentage point more each year than is in the OBR forecast, average incomes will still be 16 per cent lower in 2021/22 than would have been reached if pre-crash trends had continued after 2008.
Pensioners, however, will enjoy faster-rising living standards than the rest of the population, with average incomes due to be 24 per cent higher in 2021/22 than 2007/08. After taking housing costs and household size into account, median income is projected to be almost 8 per cent higher for pensioners than for non-pensioners by 2021/22, compared to 10 per cent lower in 2007/08.
Campbell Robb, chief executive of the Joseph Rowntree Foundation, who funded the report, said: “These troubling forecasts show millions of families across the country are teetering on a precipice, with 400,000 pensioners and over one million more children likely to fall into poverty and suffer the very real and awful consequences that brings if things do not change.
“One of the biggest drivers of the rise in child poverty is policy choices, which is why it is essential that the Prime Minister and Chancellor use the upcoming Budget to put in place measures to stop this happening. An excellent start would be to ensure families can keep more of their earnings under the Universal Credit.”
Tom Waters, an author of the report and a Research Economist at IFS, said: “If the OBR’s forecast for earnings growth is correct, average incomes will not increase at all over the next two years. Even if earnings do much better than expected over the next few years, the long shadow cast by the financial crisis will not have receded – average incomes in 2021–22 are still projected to be £5,000 a year lower than we might have reasonably expected back in 2007–08.”
A Treasury spokesman said: “We are taking action to support families with the costs of living by cutting taxes for millions of working people, doubling free childcare for nearly 400,000 working parents and introducing the National Living Wage.”