Government needs to understand and measure poverty

Baroness Philippa Stroud, Chief Executive, Legatum Institute

Baroness Philippa Stroud

The Covid-19 pandemic is the most significant crisis of modern times. Since March, we have been bombarded with daily death statistics from this disease. But to focus only on the health implications of Covid-19 obscures its impact on the lives of millions, particularly those on the edge of poverty.

We can see with our own eyes that many of our more vulnerable families are struggling at this time, but the official data is all over the place. Since 2016 the Government has been making policy decisions without an official measure of poverty. What Government needs now is a way of measuring poverty that unites those on both the left and right and that acts as a tool to guide decision making at times of crisis. It is time to put an end to the political football that is poverty measurement and actually develop a comprehensive anti-poverty strategy that changes people’s lived experience. The Social Metrics Commission (SMC) developed such a measure, which not only measures poverty but can highlight who is at risk of real disadvantage. The Government announced last May that it was using this work to create Experimental Poverty Statistics, but little has been heard of this since.

UK poverty is a significant long-term issue. The proportion of the population living in poverty has hardly changed over the last 20 years. The SMC’s measure shows that, prior to the pandemic, more than one in five people in the UK (22%) lived in families in poverty. This means that 14.4 million people lived in poverty in the UK, including 4.5 million children.

Last week the Legatum Institute published its first analysis of the impacts of the Covid-19 pandemic in this poverty landscape. This uses our newly created Policy Simulator alongside the SMC’s poverty measure to understand how the economic shock (including the furlough scheme, falling employment, and decreased wages) and action the Government has taken have impacted those living in or at risk of poverty.

It goes without saying that the situation has not improved over the last few months, and that poverty has risen as a result of the pandemic. Compared to the situation where Covid-19 had not hit the country, 440,000 more people were in poverty this summer, and 690,000 more this winter, including a further 150,000 children. Nor have these impacts been evenly spread, being felt the hardest by young workers, those in relatively low-paying employment, and those working in sectors such as hospitality and retail.

The challenge is that whilst many have worked to draw attention to these issues, as a nation we are walking blind through a crisis with no agreed national definition of poverty and no agreed official measure of poverty. This means that whilst we are responding to some of the challenges that are arising from the pandemic, we are not able to take pre-emptive action to prevent hardship in a compassionate, accurate and timely way.

The Government has taken steps that have proved to be effective in protecting many families (including the additional £20 a week in Universal Credit and Working Tax Credit and enhanced support for the self-employed on Universal Credit) and has shielded nearly 700,000 people from falling into poverty. But many still remain vulnerable to falling through the cracks.

If the Government were to adopt the SMC’s framework, it would have access to a dashboard that could identify the pressure points in the welfare system in real time and develop emergency indicators for when different groups need specific support. This would facilitate a comprehensive anti-poverty strategy that would allow it to act proactively rather than reactively. In short, it could adopt an early intervention approach that shields families from the destructive impact of poverty.

In the wake of the economic damage that this last year has caused, we will no doubt see pressure on the Treasury to look to its welfare budgets for savings. This approach would be devastating for those living in poverty, particularly vulnerable children.

It is no surprise that the economic fallout from the Covid-19 pandemic has increased poverty in the UK. But the strength of reaction from the Government has insulated hundreds of thousands of people from poverty. This shows that, with the right tools and the right information, Government can ensure that, at a time of crisis, many of those who are vulnerable to poverty are protected. To ensure this continues as we begin to adapt to life after, or living with Covid-19, there is a clear need for the Government to push ahead with its creation of Experimental Poverty Statistics and to place a comprehensive anti-poverty strategy at the heart of its Covid-19 recovery response.

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