This November 2022 briefing considers the poverty impacts of the Autumn Statement 2022, using original analysis from the Legatum Institute based on the Social Metrics Commission’s approach to poverty measurement. It provides projections of the likely poverty rate in the 2023-24 financial year, in light of the announced changes to Government policy. This includes consideration of:
- Changes to personal taxes.
- The uprating of working-age benefits, pension credit, and the state pension.
- The package of support for households to meet the cost-of-living crisis and, in particular the rising costs of energy.
Overall, we find that:
- Poverty in 2023/24 is likely to reach 15.6 million
- However, compared to the case without the energy support package, and if pensions and working-age benefits had instead been uprated by earnings growth:
- Poverty is 1.4 million lower.
- One million fewer people will be in deep poverty.
In terms of the individual impacts of specific policies:
- The decision to continue to uprate benefits and pensions by CPI inflation, rather than earnings (as had been proposed by some), means that the number of people in poverty is half a million lower than it would have been. This includes:
- 350,000 fewer working-age adults and children in poverty; and
- 100,000 fewer pension-age adults in poverty.
- Overall, changes to personal taxes have a relatively small impact on poverty.
- The continuation of the energy support package means that that the number of people in poverty is 900,000 lower than it would have been. This includes:
- 700,000 fewer working-age adults and children in poverty; and
- 200,000 fewer pension-age adults in poverty.
Overall, the Autumn Statement has delivered a significant fiscal tightening, whilst protecting those on the lowest incomes from the worst impacts of this. Given the scale of the fiscal tightening required, this is to be applauded. However, poverty rates remain higher than at any point so far this century. With headwinds from continuingly weak economic outlook and rising prices, there is a real chance that poverty could continue to rise.
There are also challenges for the future. The Autumn Statement announced significant real-terms cuts in public spending, with no increase in departmental Spending Review settlements to account for rising prices. These cuts will be partially offset by an additional £8 billion in NHS and social care funding, along with an additional £2.3 billion for schools. While provision of public services and other in-kind income is not explicitly considered in the SMC measure, the SMC’s Lived Experience Indicators provide a framework for assessing the resilience gap experienced by those in poverty. Using this framework, the Legatum Institute will continue to track the impact of real-terms reductions in spending on those living in poverty.