THE BLOG

Autumn Statement: A Long-Term Economic Plan Should Have a Poverty-free UK at Its Heart

04/12/2014 16:42 GMT | Updated 03/02/2015 10:59 GMT

The Autumn Statement was the Government's last chance to ensure the economic recovery does not bypass the worst off. This opportunity was missed.

George Osborne's claims about the health of the jobs market yesterday ignored the harsh realities. The nature of work is now more precarious, low-paid and insecure, making an escape from poverty ever harder in the modern labour market. Despite record high employment, people are left struggling to make ends meet and unable to escape poverty through work. Figures for JRF show two thirds of people who moved from unemployment into work in the last year are paid below the Living Wage. This is partly why the Treasury coffers are depleted and our economy's full potential is not being reached.

Our state of the nation report last week by the New Policy Institute spells out the state of the labour market and the scale of the problem in stark detail. The Chancellor talked about the facts on employment and the facts are these: people forced into self-employment earn 13% less today than they did five years ago; 1.4million people are on precarious contracts not guaranteeing a minimum number of hours; and the long term prospects for people in low paid work are not promising either - only a fifth of low paid employees have left low paid work completely 10 years later.

The proposed remedy to the rising deficit has been to try to hold down the welfare budget, a move which will fail unless the Government tackles its underlying causes. The raid on the Universal Credit budget by freezing the Work Allowance is a backwards step in making work pay and undermines the support offered for childcare costs. JRF has argued help with childcare should not be funded at the expense of other poorer families, and the balance of funding between poorer and better off families need to be looked at again.

Another of the Chancellor's hand outs, raising the personal tax allowance, is an expensive way of helping the working poor. Most of the additional money will actually go to better off families, while poorer families only keep a third of the tax cut because of the way the benefit system takes away support from households as their earnings rise. Raising the Work Allowance, rather than freezing it, would have been an effective way of making work pay for those in poverty and ensuring the benefits of the economic recovery are felt by the worst off.

But the move continues a trend we have seen in this Parliament from distributing resource away from the bottom to the middle. The Statement found additional money to support families' budgets, but targeted it largely at the better off: those who have pension pots, ISA savings, take children on foreign holidays and can afford to get onto the property ladder. This was a missed opportunity to support low income families, who have seen their cost of living rise 50% in the last 10 years.

George Osborne has high hopes for 2020 but we know for the worst off families, the forecasts are heading in the wrong direction, with one in four expected to be living in poverty by then. We are concerned the recovery will be built on rising poverty and insecurity. A long-term economic plan should have a prosperous and poverty-free UK at its heart.