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Sunday, June 26, 2022

Poor families are set to spend 50% of their income on utility bill report suggests

A report published earlier this week looks at poverty in the UK and how Covid-19 has impacted families

A damning new report looking at poverty in the UK has found that 1.8 million children are growing up in ‘deep and persistent poverty’, with 500,000 more children living in significant poverty in 2019/20 compared to 2011/12.

The report titled ‘UK Poverty 2022: The essential guide to understanding poverty in the UK’, published by the Joseph Rowntree Foundation, also found that households on low incomes will be spending on average 18% of their income after housing costs on energy bills after April.

For families with a single parent on a low income, this rises to 54%. The impact on middle-class families will be much less severe – with energy bills only accounting for 6% of household spending.

Gas and electricity prices are expected to soar. Image: Kwon Junho.

The report also states that poverty rates are high in the North East (25%) and Yorkshire and Humberside (24%).

Across these regions, high poverty rates are driven by comparatively lower earnings, with a higher proportion (33%) of in-work adults in lower-paid ‘routine’ occupations compared with the rest of the UK and a higher proportion of working-age adults not in work – 27%, compared with 23% for the rest of the UK on average.

People from Bangladeshi, Pakistani and Black families continue to have higher poverty rates at over 40%.

The analysis also warns that the poorest families will be hit disproportionately hard when the Energy Price Cap rises in the spring.

The price cap limits what firms can charge for their default standard variable tariffs. It doesn’t limit how much you pay, if you use more, you will pay more, and use less, you will pay less, but it is a cap on the individual unit of gas and electricity.

The summer price cap will be confirmed on 7 February 2022, and the new rates take effect on 1 April. Analyst firm Cornwall Insight is predicting that the cap will rise by 51% in April – to £1,925/year for someone on typical use.

Low-income households have less of a “buffer” against rising expenses. Image: Sarah Agnew.

The report states: “Low-income households have less of a buffer against rising costs or any unexpected expenses, given they are less likely than other households to have savings, with just over a third of people in the poorest fifth of households having liquid savings of less than £250 compared with 1 in 6 of the overall population.”

Children have had the highest poverty rates throughout the last two and a half decades. child poverty is increasing, reaching 31% in 2019/20.

Families with children are more likely to be receiving benefits than families without children, so this pattern reflects changes in employment levels, earnings, and benefits.

After the pensioner poverty rate fell dramatically from around 29% in the late 1990s to 13% in 2012/13, it has edged up ever since and now stands at 18% in the latest data.

Employment also remains lower than its pre-pandemic level, overall earnings are flat, National Insurance is set to increase, and tax thresholds are frozen. Housing costs are continuing to rise, and inflation is also set to increase.

Another worrying element of the pandemic is how it is likely to have increased existing educational inequalities.

The pandemic has also widened the attainment gap between the most and least disadvantaged kids in the UK.

The report states: “We know that the Covid-19 pandemic has widened the attainment gap between most and least disadvantaged pupils in the UK. This is due to a range of factors including the digital divide, home learning environments and potentially deepening poverty over the pandemic.”

Katie Schmuecker at JRF said: “The reality for many families is that too many children know the constant struggle of poverty. The fact that more children are in poverty and sinking deeper into poverty should shame us all.

“The case for targeted support to help people on the lowest incomes could not be clearer. But this must go hand in hand with urgent action to strengthen our social security system, which was woefully inadequate even before living costs began to rise.

“Our basic rate of benefits is at its lowest real rate for 30 years and this is causing avoidable hardship. The Government must do the right thing and strengthen this vital public service.

“Rising energy prices will affect everyone, but our analysis shows they have the potential to devastate the budgets of families on the lowest incomes. The Government cannot stand by and allow the rising cost of living to knock people off their feet.”

The JRF is calling for an immediate emergency payment for people on the lowest incomes to help prevent hardship in the months ahead.

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