Work no longer pays for Britons caught in "perfect storm" of falling incomes and rising costs

14th Jun 2012

Charity warns "UK could return to inequality levels not seen since Victorian times"

Government rhetoric about 'making work pay' - used to justify sweeping welfare reforms- is sounding increasingly hollow, according to a new report by Oxfam, which details how getting a job in modern Britain is no guarantee of escaping poverty.

Oxfam's report, The Perfect Storm, documents how the Government's deficit reduction strategy, which has targeted £99 billion of budget cuts against just £29 billion of tax increases each year by the end of this parliament, is disproportionately impacting those on the lowest incomes. It describes a 'perfect storm' of factors - from increasing unemployment and lack of decent jobs, to rising living costs and falling incomes and the proposed deep cuts to welfare and public services - that are buffeting the UK's most vulnerable citizens, both those in and out of work.

Publication of the report is timed to coincide with release of the Government's latest data on Households Below Average income later today, which are expected to reveal an increase in the number of working people in the UK living in poverty. Currently 6 in every 10 of the 7.9 million working-age adults in poverty are from working households*.

Oxfam's Director of UK Poverty, Chris Johnes, said: "Despite the Government's rhetoric about making work pay, having a job is no longer necessarily enough to lift someone out of poverty; more working age adults in poverty now live in working households than in workless ones. The Government is justifying huge cuts to welfare support for people on low incomes by saying this will incentivise work, but there simply aren't enough decent jobs available."

The Perfect Storm reveals that since the start of the recession in 2008, 830,000 permanent full-time jobs have been lost while half a million part-time jobs have been created. The number of people in temporary work because they can't find a permanent job has risen across that period by 73 per cent, meaning there are now 1.4 million 'frustrated part-timers' in the UK. There are also an estimated 2 million 'vulnerable workers'; people whose work is characterised by insecurity, uncertainty over hours and low pay. For instance, the UK has the highest number of zero hours contracts in Europe, meaning people can arrive for a day's work only to be turned away by their employer.

One knock-on effect is that the number of people in work but having to claim Housing Benefit has more than doubled over the period to nearly 900,000. A tightening of the eligibility rules for working tax credits also means that the average qualifying family is expected to lose £2,000 per year.

Amongst a range of policy recommendations included in The Perfect Storm, Oxfam is calling on the Government to reverse these cuts to working tax credits and to increase the minimum wage, which has fallen or been frozen in real terms in each of the last four years. The charity also believes that reducing the amount of the new Universal Credit people lose when starting a job, from 65 to 55 per cent, would help improve the validity of work as a route out of poverty.

Oxfam's report underlines how as more people in work are forced to turn to welfare, cuts to benefits are making many claimants more vulnerable. People on benefits, whether in or out of work, are increasingly turning to charities for help - with thousands more accessing food banks this year than last. More than 50 partners of Oxfam's UK poverty programme, responding to a recent survey, have reported a growing demand for their services because of the 'perfect storm', while many are experiencing a drop in government funding.

The 'perfect storm' is also contributing to greater inequality in the UK, as the gap between the earnings of rich and poor widens. UK average earnings shrunk 4.4 per cent last year, while the incomes of FTSE 100 company directors rose by 49 per cent**.

Johnes added: "We need to see income being distributed more fairly if we are to make any impact on reducing levels of poverty; if we carry on down this path the UK will return to levels of inequality not seen since Victorian times."

The report makes a series of additional policy recommendations that Oxfam believes could help mitigate the impact of the 'perfect storm'. These include:

·Protecting the safety net of the welfare system, by making sure no further cuts are introduced that disproportionately affect the poorest
·Reducing cuts to public services and increasing progressive taxation instead
·Protecting people living in poverty from high energy prices
·Introducing a maximum level of interest lenders can charge to protect people in debt.
·Investing in universal childcare and affordable housing and extending the right to flexible working to all workers

Oxfam believes the additional cost of these measures could be met through a crack down on tax avoidance and evasion. Johnes concluded: "If the government did more to clamp down on tax avoidance and evasion, which still cost the UK economy £35 billion a year, it could give people who are struggling a lifeline and help us start to build a better Britain. This crisis could be an opportunity to change how we think about what a fair society looks like, and to build foundations for overcoming poverty once and for all."

/Ends

For more information, to receive an embargoed copy of the report, or to arrange interviews please contact: Sarah Dransfield, Oxfam Press Officer, on 01865 472269 or sdransfield@oxfam.org.uk

Notes to editors

Perfect Storm key stats:

·Spending cuts hit the poorest tenth of the population 13 times harder than the richest tenth.
·Seventy-two per cent of the benefit cuts announced in 2010 will be paid by poor women.
·The number of Housing Benefit claimants in work more than doubled between November 2008 and February 2012.
·Since the recession started, 830,000 permanent full-time jobs have been lost, and half a million new part-time jobs created. The number of people in temporary work because they cannot find a permanent job has risen by 73 per cent. The UK has weaker protection for those in work than Mexico.
·Average earnings shrank by 4.4 per cent last year. Incomes of the directors of FTSE 100 companies rose by 49 per cent.(figures for the financial year up to April 2011)
·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.

*DWP Households Below Average Income statistics 09/10. 7.9m working-age adults are below the 60% median after housing costs: 24% from households where all adults work, 36% where at least one adult works and 40% from households where nobody works.
** Figures from ONS & IDS for financial year up to April 2011