2022 Exams - Policies to Reduce Relative Poverty

In this video we update students with the latest data on relative poverty; focus on policies designed to reduce it and consider some of the threats to poverty in 2022.

Defining relative poverty

The most commonly used relative poverty line is set at 60% of median equivalised disposable household income

Deep poverty: Households with equivalised incomes below 50% of the median

Relative poverty can also be measured in a multi-dimensional way that goes beyond just income levels – for example, the risk of homelessness, or gaps in healthy life expectancy at birth

And the persistence (duration) of relative poverty is also crucial

Measuring relative poverty in the UK

• More than 1 in 5 of the UK population (22%) are in poverty in our country – 14.5 million people.
• Of these, 8.1 million are working-age adults, 4.3 million are children and 2.1 million are pensioners
• Almost 1 in 3 children in the UK are living in poverty (31%)
• Larger families, that is those with three or more children, have always faced a disproportionate risk of poverty.
• Poverty rates are high in the North East (25%), West Midlands (25%) and Yorkshire and Humberside (24%).
• Around two-thirds (68%) of working-age adults in poverty live in a household where at least one adult is in work

The main policy instruments for changing relative poverty in disposable incomes are government spending (including welfare) + impact of direct and indirect taxes

Other policies are also important including employment initiatives, housing reforms and regional policy

Macroeconomics also affects relative poverty – there are fears for example that the 2022 “cost-of-living crisis” will cause higher rates of poverty especially with the sharp rise in food and energy prices.

Threats to relative poverty in the UK in 2022

1. Rising inflation - key components of food, housing and utility costs all rising – huge rise in the energy price cap – steep increase in fuel & food poverty.
2. Falling real value of welfare benefits due to high inflation
3. Rising food bank use and more children eligible for school meals – schools under pressure to offer smaller meals
4. Rents – housing rents continue to rise and so too are evictions and homeless numbers
5. Risks of another economic recession caused by a deep fall in real disposable income – threatens employment