The Perfect Storm: Economic stagnation, the rising cost of living, public spending cuts, and the impact on UK poverty | Economic Inequality

Please download to get full document.

View again

of 11
All materials on our website are shared by users. If you have any questions about copyright issues, please report us to resolve them. We are always happy to assist you.
Information Report
Category:

Others

Published:

Views: 6 | Pages: 11

Extension: PDF | Download: 0

Share
Related documents
Description
The combination in the UK of economic stagnation and public spending cuts is causing substantial hardship to people living in poverty. This amounts to a ‘Perfect Storm’ of falling incomes, rising prices, public service cuts, benefit cuts, a housing crisis, and weak labour rights. By making different political choices, the government can both protect people in poverty and help to stimulate economic recovery in the short term, and set the UK on the way towards economic, social and environmental sustainability in the long term.
Transcript
  Oxfam Briefing Paper June 2012 The Perfect Storm Economic stagnation, the rising cost of living, public spending cuts, and the impact on UK poverty   www.oxfam.org.uk   Micky works part- time as an administrator for a local charity. He’s on the minimum wage and struggles to make ends meet, having a weekly budget for food of £15. Despite his vast experience  –  he has run a business and worked in management for a supermarket chain  –  he cannot find a permanent job that pays. Photo: Mora McLagan/Oxfam The combination in the UK of economic stagnation and public spending cuts is causing substantial hardship to people living in poverty. This amounts to a ‘Perfect Storm’ of falling incomes, rising prices, public service cuts, benefit cuts, a housing crisis, and weak labour rights. By making different political choices, the government can both protect people in poverty and help to stimulate economic recovery in the short term, and set the UK on the way towards economic, social and environmental sustainability in the long term.   2 1 Summary   Introduction The UK is facing a set of serious, interlocking challenges. The economy is stagnating, unemployment is increasing, prices are rising, incomes are falling, and spending on public services is being cut back rapidly. In this paper, Oxfam has taken its experience of working with partner organisations across the UK and the stories of individuals with whom those partners work, together with a wider analysis, to outline the reality of these challenges for people living in poverty. For the 13.5 million people who currently live in poverty –  a fifth of the population –  the combined impact of all these challenges is creating a ‘ Perfect Storm ’  that is pushing already fragile livelihoods to breaking point. Background: the reality of poverty in the UK The UK is the sixth richest country on earth, yet one in five of its people lives in poverty. Before the financial crisis and the economic recession, prosperity was not shared. The UK is one of the most unequal rich countries in the world, with the poorest tenth of people receiving only 1 per cent of total income, while the richest tenth take home 31 per cent. The risk of poverty is not one that is shared equally across society. Twice as many people from ethnic minorities live in poor households compared with white people; women are more likely than men to live in poverty; and, geographically, there are substantial inequalities both between and within the regions and nations of the UK. Poverty in the UK is about material deprivation: for example, more than a fifth of UK households (5.5 million or 22 per cent) are affected by fuel poverty, and inadequate heating results in thousands of unnecessary deaths each year. But it is also about life and death: premature deaths caused by health inequalities in England each year lead to the loss of between 1.3 million and 2.5 million extra years of life. And people living in poverty have to face stigma and prejudice, and a lack of recognition for the positive, non-financial contributions they make to society. „ We are seeing people on a daily basis who have not got enough money to feed themselves or their children adequately .‟   Feedback from Community Links focus group, 2012 „ What worries me, and scares me sometimes, is that there are so many programmes about benefit cheats and scroungers, and the labelling you get because you are someone on benefits. ‟   Sandra, Salford   3 The ‘Perfect Storm’ and its impact on poverty Since the economic crisis of 2008, those already in poverty have seen their poverty deepen, and millions more have become increasingly vulnerable. A combination of economic stagnation, the rising cost of living, benefit cuts, falling incomes, rising unemployment, and public service cuts add up to a Perfect Storm for the millions already struggling to make ends meet. The Perfect Storm is already affecting partners with whom Oxfam works in the UK, with increased demand on their services, just as the resources to provide that support are being withdrawn. The coping mechanisms of people living in poverty have included increasing debt, more people relying on food parcels, and women acting as ‘shock absorbers’, managing budgets and deb t and going without in order to ensure that their families have what they need. Rising unemployment and declining incomes  Average earnings shrank by 4.4 per cent last year. Incomes of the directors of FTSE 100 companies rose by 49 per cent. Incomes are decreasing across most of society due to a combination of rising unemployment (particularly youth unemployment), involuntary part-time working, pay freezes and cuts, and cuts in benefit levels. This is causing the biggest real terms fall in incomes since the mid-1970s. While real wages are falling for the majority and the National Minimum Wage has fallen over the past four years, rewards at the top have raced away: last year, earnings of directors and chief executives went up by 15 per cent, and those of directors of FTSE 100 companies soared by 49 per cent. Falling incomes and rising inequality are part of a longer-term trend. In the decade to 2008/09, 40 per cent of total income growth in society went to the richest tenth of people, and a decreasing proportion of gross domestic product (GDP) has gone to wages. It is predicted that, on current trends, the UK will rapidly return to levels of inequality not seen since Victorian times. The increasing cost of living  Food prices have risen by 30.5 per cent in five years. The National  Minimum Wage has risen by 12.1 per cent in the same period. Prices have risen rapidly, particularly in 2008 and 2011, even as the economy has stagnated. This inflation has been driven by food and fuel prices, both of which account for a high proportion of the spending of people living in poverty. In addition, people living in poverty have to pay more than rich people for basic necessities such as gas, electricity, and banking . This ‘poverty premium’ is  estimated to cost them an additional £1,170 a year. Finally, tax rises under the coalition „  Just because people are not screaming, it does not mean that people are not desperate. It does not mean there isn‟t a crisis. ‟   Bal Athwal, worker at the Bradford Resource Centre „I‟ve been unem  ployed before and it‟s only ever taken three months to find work. Now, I‟ve been looking for full-time work or ten months. It took me a long time to even get any interviews. ‟   Christina, Bradford „ I always worry when I make a dish that it might not be enough. And if a friend should appear with my children at dinner time, they ‟ re always welcome –  I give up my plate. ‟   Jean, Glasgow   4 government, such as VAT, have been regressive, thus affecting people living in poverty more. The poorest 10 per cent pay twice as much of their income in VAT as the richest 10 per cent. The Institute for Fiscal Studies (IFS) has calculated that, between 2008 and 2010, the poorest fifth of households experienced an inflation rate of 4.3 per cent, against 2.7 per cent for the richest fifth. The Joseph Rowntree Foundation estimates that the cost of achieving a Minimum Income Standard –  a minimum standard of living, based on a broad survey of what members of the public think constitutes the basic requirements of life –  has risen by 43 per cent over the past decade, compared with 27 per cent for general prices. Public service cuts Spending cuts hit the poorest tenth of the population 13 times harder than the richest tenth. The government plans to achieve the majority of its deficit reduction programme through public spending cuts. Poorer people rely most on public services, and spending cuts are estimated to hit the poorest tenth of the UK population 13 times harder than the richest tenth –  with planned reductions to public services being equivalent to more than a fifth of their income being taken away. These cuts mean less health care, reductions in social care, and the loss of hundreds of smaller services such as counselling support, care homes, school crossing patrols, and youth clubs. Cutting public spending has a particularly strong impact on gender equality, with women more likely to be reliant on public services than men. Cuts to the Sure Start programme in England (while the equiva-lent in Wales, Flying Start, is being protected by the Welsh govern-ment), and the thinner spreading of cash support for childcare support under Universal Credit, will particularly affect women. Public service cuts also have an impact on unemployment. Public sector employment levels are in steep decline, and women form the majority of public sector employees. Welfare reform and benefit cuts Seventy-two per cent of the benefit cuts announced in 2010 will be paid by poor women. One of the largest contributions to spending cuts has come from reductions in benefits for working-age people, accounting for £18bn per year by 2014 – 15. According to the House of Commons Library, 72 per cent of cuts announced in the 2010 Emergency Budget will be met from women ’ s incomes, against 28 per cent from men ’ s. The introduction of Universal Credit will simplify the benefits system, making it easier for people currently on benefits to transition between unemployment and work. Yet, just as the system is simplified, so eligibility is being tightened for many claimants. „ There are too many cuts in  Manchester, and there are too many places closed down, so I don‟t have many places left to  go. Since all these cuts have affected me, I‟ve actually relapsed with my mental health.‟   Bridget, Manchester „ [On benefits] you don‟t get enough to live on. £65 or £67 a week, for an adult, is not enough. Sometimes I think  , “ I am a single person and I struggle, what about families of six kids?”‟   Jo, unemployed, Bradford
Recommended
View more...
We Need Your Support
Thank you for visiting our website and your interest in our free products and services. We are nonprofit website to share and download documents. To the running of this website, we need your help to support us.

Thanks to everyone for your continued support.

No, Thanks