Poverty in Wales 2020

Our analysis underlines the importance of work, social security and housing costs in solving poverty in Wales, as well as how much the coronavirus storm has unleashed strong currents sweeping many people into poverty and others deeper into poverty.

What you need to know

• Even before coronavirus, almost a quarter of people in Wales were in poverty (700,000) living precarious and insecure lives. The risk for children alone was higher with 3 in 10 children living in poverty.
• Wales has lower pay for people in every sector than in the rest of the UK. At the start of the coronavirus outbreak, more than a third of jobs were furloughed and some local areas face a much higher risk of losing their furloughed jobs altogether, due to the types of work in the area. There is a need for a targeted job stimulus in local authority areas which are at highest risk of seeing high job losses, which are often areas that are already struggling economically.
• For low-income families, one factor in being unable to escape in-work poverty is the need to balance paid work with caring for children. Two in five local authorities in Wales report that there is not enough childcare for those working atypical hours. The supply and affordability of childcare, for children of all ages (not just nursery) is important if women are to be able to fully enter the labour force and move out of poverty.
• The importance of Wales-specific social security measures should not be under-estimated. Although the UK social security system plays an important role in solving poverty, Welsh support schemes also play a vital role. With the number of Universal Credit claimants doubling from the start of the year it is likely that more people will be looking to rely on additional Welsh support. It is therefore even more important that the Welsh Government establishes a clear, effective and fair benefits system, which complements the social security system that already exists in the UK.
• Retaining the temporary uplift of Universal Credit and Working Tax Credit allowances, as well as extending this to legacy benefits is key. For instance, of the 180,000 children in poverty, 140,000 live in families that receive income-related benefits.
• Rent increases in the social rented sector have led to a concerning dramatic increase in poverty in that sector, particularly in working households, undermining its role in protecting people in poverty. As things stand, this issue will continue to be a problem in Wales as the Welsh Government has permitted rents to increase above inflation for a further five years. Increasing the supply of social housing is also necessary.
• The private rented sector remains smaller than in other UK nations, however, increasing reliance on expensive private rents puts many poorer households at additional risk of poverty. Poverty rates among private renters are higher in Wales than elsewhere in the UK.
• As the furlough scheme ends and unemployment rises, the strain on households is likely to increase. The gaps in the benefit system will become increasingly apparent for those struggling financially and arrears in housing payments and other necessary bills may begin to build. Work needs to be done to mitigate the potential long-term consequences.