Government strategy creating ‘perfect storm’ for low-income groups

The government’s austerity strategy is disproportionately hurting those on the lowest incomes, according to an Oxfam report. It describes a ‘perfect storm’ of factors – increasing unemployment, a lack of decent jobs, rising living costs, falling incomes and deep cuts to welfare and public services – hitting the most vulnerable people, both in and out of work.

The report combines an analysis of the recession’s effects with a series of policy recommendations.

Main points

  • Despite the government’s ‘rhetoric’ about making work pay, having a job is no longer necessarily enough to lift someone out of poverty – more working-age adults in poverty now live in working households than in workless ones.
  • People on benefits, whether in or out of work, are increasingly turning to charities for help – with thousands more accessing food banks.
  • There are an estimated 2 million ‘vulnerable workers’ – people whose work is characterised by insecurity, uncertainty over hours and low pay. The UK has the highest number of ‘zero-hours’ contracts in Europe.
  • One knock-on effect is that the number of people in work but having to claim housing benefit has more than doubled during the recession, to nearly 900,000.
  • The government should reverse cuts to working tax credits; increase the minimum wage; and reduce the marginal deduction rate from 65 per cent to 55 per cent of the new universal credit when people start a job or increase their income.
  • The government should also make sure no further welfare cuts are introduced that disproportionately affect those in the greatest poverty; reduce cuts to public services and increase progressive taxation instead; protect people living in poverty from high energy prices; and introduce a maximum level of interest lenders can charge to people in debt.

Source: Moussa Haddad, The Perfect Storm: Economic Stagnation, the Rising Cost of Living, Public Spending Cuts, and the Impact on UK Poverty, Oxfam GB

Links: Report | Summary | Press releaseGuardian report