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Poverty is going up. Living standards are going down. The Government needs an answer.Things can only get worse – that’s the increasing consensus on our economic outlook. And this week the IFS published research looking at living standards and poverty up to 2020, that unfortunately only confirms the gloomy mood

Here are some of the top findings:

•    Average incomes are expected to fall by about 7% in real terms over the next 3 years. To set that in context, that’s the largest 3-year drop for 35 years.

•    By 2012-13 there will be about 600,000 more children and 800,000 more working-age adults living in absolute poverty than in 2009 (the latest figures)

•    By 2020, almost 1 in 5 (19%) working age parents will be in absolute poverty. In 2009 it was 14.9%. 

•    In isolation, Iain Duncan Smith’s Universal Credit will reduce poverty (both relative and absolute).


But other policy decisions – in particular changing the index for benefit increases from the Retail Price Index to Consumer Price Index – more than offset its beneficial impact.There’s an important debate about how we measure poverty: one of the oddities of relative poverty is that in hard times it can stay broadly the same, even if everyone is individually worse-off. As a result, most commentators agree it’s important to consider a broad set of social standards and indicators. In turn, the best solutions are those that focus on tackling the underlying drivers of poverty - the instability and insecurity of so many poorly paid jobs, frustrated opportunities, the limits to child care for working parents, educational standards – rather than on one-dimensional targets.

In this case, though, the means of measuring poverty is a bit of a distraction. The IFS projections look at a range of different poverty measures, for a start. The trends are the same no matter which metric is used, and if we navel-gaze about the methodology we risk obscuring that bleak picture.
And crucially, the research also uses different projections of employment and growth. Regardless of the economic situation, poverty and income forecasts remain broadly the same. Even if we hit a purple patch of growth at some point soon, things will remain tough. That means that the squeeze on living standards isn’t a temporary glitch, but a fact of political life for the foreseeable future – something will surely dominate voters’ concerns, well beyond this Parliament.

In short, the important thing about the report is that by any measure, living standards across society will fall, and poverty will increase. A few weeks ago, Tim Montgomerie of ConservativeHome outlined the case for an ‘offer to the poor’ from the Government. The IFS research suggests that outlining and clarifying that offer is now an urgent task.

Written by Gordon Hector
Tuesday, 18 October 2011 11:11

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