JRF - Key poverty figures released this week will show who economy is working for

On Thursday, new annual poverty figures will be released – a key signal for whether our economy is delivering for society. The last set of figures showed a rise, with an unacceptable 11.4 million people in absolute poverty (the government’s preferred measure) including almost a quarter of children (3.3 million).

At the top of the list of a busy week of economic news, Thursday’s poverty release will tell us whether absolute poverty – the government’s preferred measure – has risen. Absolute poverty would usually be expected to fall year on year as a nation becomes more prosperous. Any rise in absolute poverty would be unacceptable development for the UK economy and government, especially as this would be the second rise in a row. This comes alongside the latest estimates for inflation on Wednesday and the Bank of England’s next interest rate decision on Thursday.

Stepping back, this week will provide the latest update on how our economy is performing for people on the lowest incomes and the issues they care about, which include the cost of essentials and the level of income from earnings and benefits. As it stands, the UK is on course for a decade of lost living standards.

14.4 million people are in relative poverty – including nearly 3 in 10 children (4.2 million). The broader picture is that it has been almost twenty years and six Prime Ministers since the last prolonged period of falling poverty in the UK. Instead, over the last two decades, we have seen poverty deepen, with more and more families falling further and further below the poverty line.

Annual poverty figures

The DWP will release the latest Households below average income (HBAI) data for 2022/23 on Thursday 21 March at 9:30am.

• HBAI summarises incomes, inequality and living standards for that year. It also includes the latest figures on relative and absolute poverty.   
• Absolute poverty looks at the position of people on low incomes today against a fixed poverty line to see if their incomes are growing faster than inflation, whereas relative income measures look at whether they are catching up with average incomes
• Whether relative, absolute or other poverty measures have risen will be a key indicator of the prospects of the poorest in our society since 2010/11.
• The year the data covers (April 2022 – March 2023) spans the period of peak inflation, which is a key driver of absolute poverty trends.

Prices and inflation

The latest inflation figures will be released on Wednesday 20^th March at 7:00am.

• Despite inflation falling recently, the cost of essentials – including food, energy and basic toiletries, but excluding housing – was ranked the No.1 concern by the public in recent YouGov polling for JRF. 73% of people were either worried or very worried about essentials given their personal circumstances.
• The average household today (first quarter of 2024), is currently spending £280 more per year (2024 prices) on essential goods and services compared with the first quarter of 2021. Since April 2021, overall prices have risen by around a fifth, with food up by 30% and energy up by 75%.

Earnings and living standards

The latest labour market data was released last week, and JRF has produced forecasts up to 2029

• Despite lower levels of inflation and the cut to National Insurance announced at the Budget, at the beginning of next year (Q1 2025) household post-tax earnings will still be £380 per year lower than at the beginning of 2021.
• Beyond this, household post-tax earnings are currently not set to recover 2021 levels until 2029, amounting to a lost decade in living standards.
• The real terms value of cash transfers from government – including working age benefits, disability benefits and payments to pensioners – is currently £660 per year lower

(2024 prices) than it was at the beginning of 2021, and next to none of this lost ground is recovered by the beginning of 2029 (still £650 per year lower in real terms)

Interest rates

The Bank of England’s interest rate decision will be announced on Thursday 21 March at 12:00pm.

• Elevated interest rates are still in the process of feeding through to the cost of mortgages and other loans. Pressure is piling on an economy that already entered recession at the end of last year.
• UK mortgages in arrears hit a seven-year high in the final quarter of 2023, according to Bank of England data.
• It’s also harder for people on lower incomes to get a loan if they need one as income thresholds to qualify for a loan have risen.
• Pawnbroker H&T said last week that demand for pledge lending was at “record levels”. JRF’s own research from October 2023 found that over 1.5 million low-income families were using pawnbrokers, with 98% of these families going without essentials like food.