‘Child poverty could hit record high’

UK households are facing the prospect of stagnating living standards, while the proportion of children living in poverty risks hitting a record high by the end of the parliament, according to a new report published this week by the Resolution Foundation.

The Living Standards Outlook 2019 says that this bleak forecast for living standards is driven largely by weak nominal pay growth which, while strengthening to over 3 per cent in late 2018, is projected to remain well short of its pre-crisis trend of 4 per cent over the next five years.

The living standards outlook for low-income families is particularly poor. For low-to-middle income working households, real disposable incomes in 2023-24 are on course to be no higher than they were 20 years earlier in 2003-04, says the Foundation.

While weak productivity and earnings growth are holding back living standards for most households, government policy is driving the particularly weak outlook for lower-income groups, it adds. The Foundation notes that the final year of the benefit freeze – which will reduce working age household incomes by £1.5bn – will start in April 2019, while the impact of the two-child limit on benefits will grow over the remainder of the parliament.

The Living Standards Outlook 2019 shows that these ongoing welfare cuts are set to cause a sharp rise in relative child poverty, which has been increasing continuously since 2011. It projects that by the end of the parliament the proportion of children living in relative poverty (after housing costs) is on course to hit 37 per cent – exceeding the previous high of 34 per cent in the early 1990s.

The Foundation warns that by the end of the parliament the majority of children in single parent families or in larger families (with more than two children) could be living in relative poverty.

The Foundation notes however that the UK’s current economic outlook is highly uncertain, and outlines measures that could alleviate poverty, for instance, it says strengthening nominal wage growth by 1 percentage point (bringing it into line with the pre-crisis average of 4 per cent) could treble the strength of income growth over the reminder of the parliament (from 1.9 per cent to 6.1 per cent).

The Outlook also finds that were the UK to repeat the employment success of the last two years for the next two – bringing an extra 900,000 people into work – typical income growth over the next five years would increase to 2.6 per cent.

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