The Institute for Fiscal Studies predicts an increase of more than a million in the number of children living in poverty. The number of children living in poverty will soar to a record 5.2 million over the next five years as government welfare cuts bite deepest on households with young families.
The IFS said freezing benefits, the introduction of universal credit and less generous tax credits would mean a surge in child poverty and that the steepest increases would be in the most deprived parts of the country.
By 2021-22, the IFS expects 37% of children to be living in relative poverty – defined as a household where the income is less than 60% of the UK median – after housing costs have been taken into account. The thinktank said this was the highest percentage since modern records began in 1961.
The report’s findings, which also predict a widening of the gap between rich and poor and four more years of weak income growth. Living standards would continued to be under pressure over the coming years, the thinktank added, noting that the weakness in income growth since the recession had been unprecedented in recent times.
The IFS said freezing benefits, the introduction of universal credit and less generous tax credits would mean a surge in child poverty and that the steepest increases would be in the most deprived parts of the country.
By 2021-22, the IFS expects 37% of children to be living in relative poverty – defined as a household where the income is less than 60% of the UK median – after housing costs have been taken into account. The thinktank said this was the highest percentage since modern records began in 1961.
The report’s findings, which also predict a widening of the gap between rich and poor and four more years of weak income growth. Living standards would continued to be under pressure over the coming years, the thinktank added, noting that the weakness in income growth since the recession had been unprecedented in recent times.
Median income growth had slowed from its historical average of 2% a year to 0.5% between 2007 and 2015, and was projected to increase by 0.8% a year in the period up to 2021, the report said. A decade and a half of weak growth meant median incomes in 2012 were on course to be 20% lower by the end of the current parliament in 2022 they would have been had the pre-recession trend continued.
Andrew Hood, an author of the report and a senior research economist at the IFS, said: “Growth in average household incomes over the next few years is likely to be sluggish at best. If workers’ earnings grow as the OBR [Office for Budget Responsibility] expected back at the March budget, median income is projected to rise by just 4% over the next four years – about half as fast as was normal before the financial crisis. But given that the OBR have already indicated they now think that forecast was too optimistic, the true picture could be even worse.”
Income inequality narrowed between 2007 and 2015 because the squeeze on earnings growth hit those on higher incomes hardest while working-age benefits remained “essentially unchanged”, the IFS said. It added, however, that this trend would be reversed over the next few years, “with real earnings growth boosting the incomes of those at the top of the distribution more, while benefit cuts fall largely on those nearer the bottom”.
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