The coronavirus crisis has resulted in a sharp increase in poverty and low incomes across the UK, but the outcome would have been much worse without additional government support this year, according to two independent think-tank reports published on Monday.
The Legatum Institute found that the number of people living in poverty had risen by almost 700,000 to 15.2m this year as a result of the pandemic’s impact on jobs, wages and profits while the New Economics Foundation warned that a third of the UK’s population would be living below the minimum socially acceptable standard of living by next spring on current government policy.
The similar findings from think-tanks on both sides of the political spectrum will put further pressure on ministers to extend a temporary uplift to universal credit past its current expiry date at the end of March.
Researchers at the right-of-centre Legatum Institute modelled the likely effects of the pandemic on low incomes and compared the results with the “gold standard” poverty measure that will soon become the official measure used by government.
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With official figures for 2020 not due until 2022, the research used a model to estimate the 700,000 rise in poverty this year, although the Legatum Institute stressed that this rise would have been twice as high if the government had not raised the rates of universal credit and associated benefits in April.
Philippa Stroud, chief executive of the Legatum Institute and a Conservative peer, said: “Our analysis shows that, at a time of crisis, government action can protect many of those who are vulnerable to poverty.” She called for “a comprehensive anti-poverty strategy to be placed at the heart of the UK’s Covid-recovery response”.
Working-age adults who had previously been in jobs accounted for by far the largest rise in people living in poverty, the research found, with small decreases in poverty among lone parent and some workless families who gained from more generous social security.
However, the left-of-centre NEF, which advocates a minimum-income guarantee for all working-age adults, said its research showed up the inadequacy of the UK’s welfare safety net, with millions set to fall into hardship even with the temporary support.
“In a world where the chancellor has at times moved heaven and earth to protect jobs, the lack of support given to those losing work has been conspicuous,” said Alfie Stirling, the NEF’s chief economist.
The foundation’s research took a similar approach to modelling incomes during the pandemic, although using a different threshold for low income — the Joseph Rowntree Foundation’s calculation of the minimum income people need to meet their material needs and participate fully in society.
This is a higher threshold than Legatum’s poverty line with correspondingly more people falling below it.
Nevertheless, it found the pandemic had led to a similarly large increase in people living on low incomes and warned that if the government did not extend more generous social security into 2020-21, the number of those living with incomes below the minimum income standard would rise from 20m in September to 22.5m in April.
More than half of them would be living on less than 75 per cent of the minimum-income standard, a threshold below which families are far more likely to be in material deprivation — a similar number to Legatum’s estimate of 15.2m people living below the poverty line.
This drop in UK living standards reflects the pressure placed on family incomes by rising job losses, cuts to pay and hours and furloughing of workers on four-fifths of wages.
The NEF has assumed that 4.5m people will be on furlough during the second wave of the Covid-19 crisis, a more conservative estimate than the Bank of England, while using the BoE’s forecast that unemployment will average 6.3 per cent in the second quarter and peak at 7.5 per cent in the spring.
Based on research conducted before coronavirus hit, the Joseph Rowntree Foundation set the minimum income standard for 2020 at a weekly £320.69 for a single adult, and £806.17 for a couple with two young children.
This article has been amended to clarify that the JRF minimum income standard amounts are weekly, not monthly
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