Solving poverty after Brexit
Brexit alone won't deliver improvements or solve poverty if the Government doesn't tackle the burning injustice of our time: in-work poverty. Using Universal Credit to let low-income workers keep more of the money they earn will help loosen poverty's grip on them, and their families.
Whatever the final deal, the public believes that after Brexit UK governments will have more power to shape the country. After nearly a decade of being asked to make hard sacrifices in the wake of the financial crash, working families struggling to make ends meet are impatient for higher living standards and better public services.
We need to make changes now to loosen poverty’s grip on families across the UK.
This briefing sets out how we can make that happen.
Why solving poverty matters now
Britain is a country where we believe in justice and compassion, including the mainstream view that everyone deserves to reach a decent standard of living. Yet for decades, far too many individuals and families have seen technological and economic change lock them out of building a better life, while their losses were glossed over.
The vote to leave the EU seemed to mark a turning point.
For a brief time, political strategists and commentators discovered a fascination for the challenges facing left-behind families and towns. It played out in the snap General Election of 2017, where the political parties tried to win over low-income voters: leading to talk of tackling burning injustices and creating a country that works for the many not the few.
Yet two years on from the Brexit vote, 14 million people are still in poverty and unable to make ends meet, let alone think about building a better future, with the country now reporting the first sustained rises in child poverty in decades.
Support for leave among different demographic sub-groups
We have record employment and the economy is growing. Yet beneath the rosy headlines, changes to the labour market, especially at the bottom end, are making it harder for people with small amounts of leverage in the market to secure a decent life. A proliferation of low-paid, unstable jobs and high living costs are pulling more and more workers into poverty – meaning families can’t put food on the table.
How can it be right that nearly four million workers are living in poverty?
If we are to deliver a post-Brexit Britain that works for people on low incomes, this means taking steps to tackle in-work poverty in the Budget, not just secure favourable trade terms and return to business as usual.
I am managing but if I fell ill I would be in trouble – I can’t afford to fall ill. If somebody gets in my taxi that’s got a cold, I say “Get out!” I can’t afford to be off for two weeks.
So, the more money you earn from working, the less benefits you get. It’s like taking it out of one pocket to put it in the other pocket and you’re just not benefiting, are you? In the long run, you’re just more tired, you’re not seeing your children as much, you’re more stressed out and for what really because you’re earning that money and then they’re taking it off you.
Feeling the strain: an economic update since 2016
Low wages, housing costs and the benefits freeze since 2016, alongside other changes, have imposed major drags on the living standards of people on the lowest incomes, negating policy achievements such as strong employment and higher minimum wages.
JRF analysis shows how low-income families have drifted further away from a decent living standard. In the three years to 2016/17, over one million more people were living in poverty in working families (6.7 million to 7.7 million). This is partly due to rising employment in the economy, but in-work poverty is rising even faster than employment as more and more people are finding that work is not providing a route out of poverty.
Workers in poverty by employment type
Incomes for families in the poorest fifth have remained static at around £250 per week. At the same time, the cost of essentials has risen. Compared to March 2016, a typical low-income household would need to find an extra £80 a year to cover their annual food shop. Covering the same energy bills would need a further £90 a year, while a further £50 would be needed to cover the same rent.
Great expectations from Brexit
The analysis above shows that amidst the fevered political atmosphere it's crucial we do not lose sight of the day-to-day struggles facing low-income households. It's a reminder that we need to listen to what people on low incomes tell us about their priorities and expectations for life after we leave the EU.
We know doing so is good politics. At the last election, the main political parties both increased their share of the vote by eight percentage points among low-income voters, but neither Labour nor the Conservatives could make a decisive breakthrough.
Analysis shows that people who thought their household’s financial situation had got worse during the year before the election were considerably more likely to back Labour than the Conservatives (48% vs 27%), despite the Conservatives making progress in struggling places and Labour-held areas. People living in an area with a low risk of poverty were 20 percentage points more likely to vote Conservative than in an area with a high risk of poverty.
With 31 marginal seats in play, it suggests low-income households could be the new battleground at the next General Election if either of the main parties are to secure a majority. Yet we know Brexit alone will not deliver the desired improvements or solve poverty, unless the Government takes a different course on domestic policy choices.
How did people vote in the UK 2017 General Election?
I had to use the credit card, I had to buy my boy a bed, bedding, carpet, blinds I had to buy, curtains, it’s things that we had to have… I had to buy flooring, and then you have to pay someone to come in and do the flooring. So then I had to take out loans… I’m in debt about £2,500, which is quite a lot. I’ve never been in that much debt. But, what was I supposed to do? I can’t tell my boy he can’t have carpet down on his floor, and you can’t have a bed to sleep in yet because you’ve got to wait. You know?
So what do people on low incomes expect from Brexit?
The British public’s top priority for the Government is to improve public services – it’s in the top three priorities for nearly eight in ten people. The next two priorities are creating more jobs and reducing the number of people on low incomes, with more than four in ten naming these in their top three. This challenges the conventional wisdom that people simply want to see lower immigration after Brexit, important though that is to many.
What should be the Government’s priorities after Britain leaves the EU?
People are relatively pessimistic about the implications of Brexit for the lives of people on low incomes, even when asked to think about the position in ten years’ time.
Despite this, a majority do believe that the Government will have more control over the British economy after Brexit (57%). This highlights the importance of making sure it delivers an economy that works for everyone – for all of the country – suggesting the Government may be held even more accountable for it than has been the case in recent years.
Expectations of the consequences of Brexit
Breaking the low-pay lock
For decades, politicians of all parties have maintained that work is the best route out of poverty, and that if you work hard, you should be able to make ends meet. As we’ve seen, the relentless rise of in-work poverty risks fatally undermining this. With an economy locking so many workers in poverty, it is hardly surprising people feel dissatisfied and disillusioned with a system that offers so little in return for so much effort.
I can’t understand why politicians don’t understand that most people’s worry is have I got enough money at the end of the month to treat myself. That’s all people are bothered about. Most people don’t care about immigration, I don’t think so. I think most people are just thinking ‘what have I got at the end of the month and can I afford to go to the cinema or something, or treat me kids’, and that’s all they’re bothered about. And I think give people that little bit of padding, it will help so many people.
If this unwritten rule is to hold true, we need to put things right. We need to change the way our economy and markets work to address the root causes of poverty and dissatisfaction with the system.
Brexit gives us an opportunity to redesign the system so it works in the interests of low-income families.
I’m one rent review away, one complaint away from being homeless. It’s as simple as that… it’s exactly how it feels. It can’t be felt any other way; that’s the situation and I feel terribly, terribly vulnerable, I really do… Absolutely, the overriding threat that hangs dark over my head; I wake up with it every day, I go to sleep with it every night. There’s no getting away from it; I’m that far away from my whole world being turned upside-down.
We can take the first steps right now to ensure people in poverty do see improvements in their living standards as we leave the EU.
Since the early 1990s, tax credits and family allowances have eased the restrictions low pay and high housing costs place on families' lives. We all rely on public services and support, whether it's schools or the NHS. For struggling families, social security is the anchor that helps them hold steady when crippling costs and low wages threaten to pull them under.
At a time when public services are needed most, we must strengthen social security to help our country's worst-off families. Yet the summer Budget of 2015 cut work allowances under Universal Credit – the amount families can keep of their earnings before support begins to be withdrawn.
It's time to allow families to keep more of their hard-earned money
We can redesign the social security system so we break the low-pay lock for struggling parents. Increasing the work allowances to their original level for families with children would put more money into the pockets of some 4.9 million parents and children in working poverty, with 300,000 of them escaping poverty altogether. In April 2019, a single parent with one child, working 35 hours a week on the National Living Wage (NLW), would be £500 better off. A married couple with two kids, one working 35 hours and one working 16 hours both on NLW, would gain £200.
Restoring the work allowances to their original level would result in 300,000 fewer people in poverty and boost the incomes of working families earning the NLW.
Nothing would send a stronger signal to struggling families that the government of the day is on their side. What's more, public support is unequivocal for taking such a step. According to NatCen, seven in ten (70%) support wage top-ups for lone parents and six in ten (58%) support them for couples with children.
Time to loosen the grip of poverty
It is only right we loosen the grip of poverty by unlocking opportunities so more families are not ‘left behind’ and to ensure they can build a better future.
At the last General Election, low-income voters made clear they wanted Brexit delivered, but demanded action on living standards too. As we leave the EU in March 2019, there remain three years until the next General Election in 2022. With the public demanding action, three more years of standing still will not do.
In-work poverty is the burning injustice of our time. Failing to make progress would not only be costly for the political parties, but more importantly, for the families whose incomes and prospects are deteriorating.
We can solve poverty in the UK. And the time to start is now.