Cost of living crisis persists but pressure on poverty eases - Budget 2023 Response

A report for the UK Poverty Unit programme by Edward McPherson

Published 16 Mar 2023

Reforms to disability benefits and childcare will reduce poverty in the medium term – but only if they are effective in driving increased employment for low-income families.

This March 2023 briefing considers the poverty impacts of the 2023 Budget, 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. This briefing also provides indicative estimates of the potential long-term poverty impact of reforms intended to increase labour force participation.

In the next financial year, we find that:

There are projected to be 15.15 million people in poverty in 2023-24. This is 450,000 people lower than we projected at the time of the Autumn Statement 2022.
The extension of the Energy Price Guarantee from April 2023 will result in:
- 90,000 fewer people living in poverty;
- 40,000 fewer people living in deep poverty.
The remaining fall in our projection comes from a range of macroeconomic effects, including the softening of prices in the energy market.

Consistent features in tackling poverty in the UK have been the challenge of supporting more disabled people who want a job to get into one, and helping parents to meet the childcare costs which would allow them to work. More recently, output in the economy has been constrained by increased labour market inactivity following the pandemic. The Budget contains a number of policies intended to address these challenges by removing obstacles to employment for those who would like to enter employment or work longer hours.

Over time, reforms to Universal Credit childcare payments, removal of the Work Capability Assessment (WCA) in Universal Credit and tightening of Universal Credit conditionality rules are all likely to have an impact on labour supply. These dynamic effects are hard to estimate with certainty, however, we might reasonably expect that:

A 5% increase in the flow of people in early stages of a disability benefit claim back into work, might reduce poverty amongst families that include a disabled people by 110,000.
100,000 inactive adults (in couple families with working partners and children) entering employment as second earners might reduce poverty amongst working families by 70,000.

Download

Cost of living crisis persists but pressure on poverty eases – Budget 2023 Response:
Reforms to disability benefits and childcare will reduce poverty in the medium term – but only if they are effective in driving increased employment for low-income families.

By Edward McPherson

Mar 2023

Download the reportPDF

Cost of living crisis persists but pressure on poverty eases – Budget 2023 Response

Reforms to disability benefits and childcare will reduce poverty in the medium term – but only if they are effective in driving increased employment for low-income families.

Download

Cost of living crisis persists but pressure on poverty eases – Budget 2023 Response:Reforms to disability benefits and childcare will reduce poverty in the medium term – but only if they are effective in driving increased employment for low-income families.

Related

Launch of new Poverty Strategy Commission in the UK

Autumn Statement will shield over a million from poverty – but poverty numbers still likely to hit record highs.

Research showing impact of Universal Credit cut – 840,000 more people in poverty

Sign-up for our newsletter

Cost of living crisis persists but pressure on poverty eases – Budget 2023 Response:
Reforms to disability benefits and childcare will reduce poverty in the medium term – but only if they are effective in driving increased employment for low-income families.