‘Since 2010, austerity – primarily in the form of deep spending cuts with comparatively small increases in tax – has been the UK government’s dominant fiscal policy, with far fewer measures to stimulate the economy. The stated aim of austerity was to reduce the deficit in the UK to give confidence to the markets and therefore deliver growth to the economy. While austerity measures have had some impact on reducing the deficit, they have delivered little growth, and public debt has risen from 56.6 per cent of GDP in July 2009 to 90 per cent of GDP (£1.39 trillion) in 2013. The policies have also had far-reaching impacts on the poorest people in the UK. In 2010, the Conservative-Liberal Democrat coalition government announced the biggest cuts to state spending since the Second World War, including significant cuts to social security and the planned loss of 900,000 public sector jobs between 2011 and 2018. Since the 2008 financial crisis began, those already in poverty have seen their impoverishment worsen, and millions more have become more vulnerable.’
Economic stagnation, the rising cost of living, cuts to social security and public services, falling incomes, and rising unemployment have combined to create a deeply damaging situation in which millions are struggling to make ends meet. Just one example among many is the unprecedented rise in the need for emergency food aid, with at least half a million people using food banks each year. As a result of the tax and welfare changes to be implemented between 2010 and 2014, the poorest two-tenths of the population will have seen greater cuts to their net income, in percentage terms, than every other group. The Institute for Fiscal Studies found that the net direct effect of the coalition government’s tax and benefit changes will be to increase both absolute and relative poverty. Over the decade to 2020, an additional 800,000 children are expected to be living in poverty – almost one in four British children. Over the same period, an extra 1.5 million working-age adults are expected to fall into poverty, bringing the total to 17.5 per cent of this group. When incomes are adjusted to account for inflation, absolute poverty has already seen its largest year-on-year increase in a decade, rising by 900,000 in 2012.
This is happening at a time when levels of unemployment remain stubbornly high. Despite reaching a 40-year low of 4.7 per cent in 2004, the unemployment rate was has remained above 7 per cent since 2009. In 2012, unemployment reached 7.9 per cent, a level last seen in 1996. In the year to May 2009, the number of people who were unemployed rose by 760,000 (from 1.61 million to 2.38 million) and, as of August 2013, stood at 2.51 million (7.8 per cent). Of even greater concern has been the growth of youth unemployment and long-term unemployment, which have remained at historically high levels since the financial crisis began. Unemployed people will experience a loss of income close to 7 per cent. The decision to change how social security payments increase will have a particularly damaging effect; linking payments to a lower inflation index, the Consumer Price Index (currently 2.9 per cent), instead of the Retail Price Index (3.3%) – means incomes will not rise to match increases in the cost of living. These changes will affect the poorest hardest, as basic costs for food, energy and housing have outpaced inflation over the last few years. This impact is compounded the poverty premium and recent measures to limit increases of some social security payments – including Jobseeker’s Allowance, Housing Benefit and Child Benefit – to just 1 per cent annually for the next three years, which greatly affects those in in-work poverty. For those in work, average hourly wages have fallen in real terms by 5.5 per cent since mid-2010. There has also been a considerable shift in the type of jobs created, with half of the increase in employment numbers since 2010 being in temporary work and a doubling of people involuntarily in temporary work.
In other words, people who want permanent jobs are increasingly unable to find them. The number of people taking part-time work because they are unable to find full time work has more than doubled since 2008. In addition, self-employment, which can leave workers with no employment rights, has seen a dramatic increase, particularly since 2011. Women have arguably been worst affected by the crisis: of the £8.1bn in net personal tax increases and benefit cuts, an estimated £5.8bn (72 per cent) will impact upon women. Women will also suffer to a greater degree from cuts to public services, due to their comparatively higher representation in the public sector. Since the 2008 financial crisis, female unemployment has risen from 678,00037 to 1.08 million in 2013 – a level last seen in 1988. This is expected to further rise to 1.5 million by 2018, as the remainder of public sector cuts take effect. Women typically use public services more than men for a variety of reasons and will therefore be more significantly impacted by their closure, both in their own right and, usually, as principal carers. The combination of these impacts from austerity measures will have long-term consequences for both gender equality and, most likely, child poverty in the UK.’ – Oxfam
