Our analysis shows that, at a time of crisis, Government action can protect many of those who are vulnerable to poverty

Government benefit changes protecting 700,000 people from poverty during Covid crisis

A new report by the Legatum Institute provides the first estimates of poverty in Winter 2020 using the Social Metrics Commission’s approach to measuring poverty, which the Government is currently developing as an Experimental Statistic. It shows that, although the number of people in poverty has increased, almost 700,000 have been protected by the £20 a week increase to Universal Credit and other benefits.

Official data to assess poverty during the Covid-19 period will first become available in 2022. This is obviously too late for decision makers who are seeking to ensure that the most vulnerable are shielded from the worst impacts of the pandemic. To tackle this, the Institute’s report summarises results from a set of ‘nowcasting’ scenarios based on the most up-to-date data on the economic impacts of Covid-19 and how they have been distributed across different families.

It estimates that:

  • Compared to a situation where the Covid-19 pandemic and associated economic fallout had not hit the UK, there are now 690,000 more people in poverty.
  • However, changes that the Government introduced to benefits, including an increase of £20 a week to Universal Credit and Working Tax Credits, and the suspension the Minimum Income Floor (which applies to self-employed people claiming Universal Credit), have insulated many families from the economic impacts of Covid-19.
  • Together, these changes have prevented a further 690,000 people from moving into poverty; meaning that Government action has halved the increase in poverty that would have otherwise occurred.

 Table: Projections of poverty in Winter 2020, with and without changes to benefits

Individuals in poverty (millions)Change in poverty compared to no-Covid-19 scenarioPoverty rate (%)Change in poverty rate compared to no-Covid-19 scenario (percentage points)
With changes to benefits15.2m+690,000 people23%+1 ppt
Without changes to benefits 15.9m+1,380,000 people24%+2 ppts

Source: Legatum Institute, Family Resources Survey and HBAI dataset (1998/99 – 2018/19), IPPR tax and benefit model.

Notes: Winter 2020 uses a high unemployment, high furlough scenario.

The report also shows that increases in poverty have not been consistent across the population:

  • Increases in poverty in Winter 2020 have been largest amongst working-age adults, with an additional 640,000 people in this group now in poverty.
  • The increases to benefits have also meant that some groups have seen a fall in poverty. In particular, poverty amongst people living in lone-parent families has reduced by 100,000 people and for those living in workless families by more than 150,000 people.
  • This has meant that impacts on poverty amongst children have been more muted than might have been expected, with a rise in poverty of 120,000 children.

Baroness Philippa Stroud, CEO of Legatum Institute said:

“Given the well-documented impacts that the pandemic is having on jobs and earnings for families right across the UK, it comes as no surprise that poverty is rising. However, our analysis shows that, at a time of crisis, Government action can protect many of those who are vulnerable to poverty, but it needs to have the right tools and the right information at its disposal.”

“To ensure this continues as we begin to adapt to life after, or living with, Covid-19, there is a clear need for a comprehensive anti-poverty strategy to be placed at the heart of the UK’s Covid-recovery response.”

“That’s why we’re calling for the Government to urgently push ahead with its development of Experimental Poverty Statistics based on the Social Metrics Commission’s work. These measures shine a light on the drivers of poverty and the range of tools Government has to tackle it; from boosting incomes and promoting work to tackling mental health and supporting families.”