Poverty in the UK: Government policy

On 22 February 2024 the House of Lords is due to debate the following motion:

Lord Bird to move that this House takes note of the case for aligning poverty reduction policy-making across government.

1. Poverty definitions and statistics

There are many different ways of defining and measuring poverty. The information below gives headline facts and figures of the measures used by the government and the Office for National Statistics. It also includes a brief discussion of the material deprivation measure of poverty.

For more information on defining poverty, see ‘The trouble with measuring poverty’ by the Office for Statistics Regulation (27 July 2020). For an expanded range of poverty statistics, see the House of Commons Library briefing ‘Poverty in the UK: Statistics’ (1 December 2023).

1.1 Definitions

Headline measures of poverty in the UK are based on income. Official statistics include relative and absolute low income before and after housing costs.^[1]

Relative low income refers to people living in households with net income less than 60% of the median in that year.

Absolute low income refers to people living in households with net income below 60% of the median in the 2010/11 financial year, adjusted for inflation.

1.2 Notes on recent poverty data collection

The most recent available data on low incomes covers up to the end of the 2021/22 financial year. Data for the previous financial year is usually published in March.

The coronavirus pandemic affected the collection of data in 2020/21 and 2021/22.^[2] The data is based on the ‘Family resources survey’. Before the pandemic this data was collected in face-to-face interviews. From April 2020, however, interviewing has been done by telephone. As a result, there have been smaller sample sizes in 2020/21 and 2021/22 than in previous years.

The government provides data on incomes both before and after housing costs.

1.3 Data on poverty: Prevalence and trends

1.3.1 All people

In 2021/22 there were 11 million people in relative low income in the UK, approximately one in every six people. This rises to approximately one in five after housing costs are taken into account.^[3]

Table 1. Number and proportion of people in relative and absolute low income, 2021/22^[4]

Figures 1 and 2 below show levels of relative and absolute poverty over time.

Figure 1. Percentage of individuals in relative low income, 2010/11 to 2021/22

Figure 2. Percentage of individuals in absolute low income, 2010/11 to 2021/22

Relative poverty rates have not changed significantly since 2010/11.^[5]

Both absolute and relative low income fell between 2019/20 and 2021/22. The Institute for Fiscal Studies (IFS) states that this was largely due to changes in benefits during this period, “in particular the (temporary) £20 universal credit uplift and (permanent) changes to the universal credit taper rate and work allowances, which allow workers to keep more of the benefit as their earnings rise”.^[6] Relative poverty declined more than absolute poverty in this time. The IFS has explained that this difference was due to labour market disruption at the start of the pandemic causing median income to fall. When median income rebounded in 2021/22, relative poverty returned to levels similar to before the pandemic.

The impact of changes to universal credit during the pandemic is discussed further in section 2.1.

There was an increase in the proportion of people in relative low income both before and after housing costs between 2020/21 and 2021/22; however, this was not statistically significant.^[7] There was no change in absolute low income in both categories between the two years.

1.3.2 Housing: Regions and countries

Figure 3 shows that in the three years from 2019/20 to 2020/21 the West Midlands had the highest proportion of people in relative low income of all UK regions or countries, both before and after housing costs. The North East comes second on both measures. However, after taking into account housing costs London moved from second lowest to third highest, reflecting the high cost of housing in the city.

Figure 3. Percentage of people in relative low income in UK regions and countries, before and after housing costs

1.3.3   Children 

In 2021/22 there were 2.9 million children in relative low income before housing costs and 4.2 million after housing costs. Children are more likely than the average person to live in a low-income household.^[8]

Table 2. Number and percentage of children in relative and absolute low income, 2021/22

(Department for Work and Pensions, ‘Households below average income 2021/22: The income distribution summary tables’, 23 March 2023, tables 1.4a and 1.4b)

Figures 4 and 5 show the proportion of children living in households with relative and absolute low income since 2010/11.

Figure 4. Percentage of children living in households with relative low income, 2010/11 to 2021/22 

Figure 5. Percentage of children living in households with absolute low income, 2010/11 to 2021/22 

Both measures of child relative low income fell between 2019/20 and 2021/22; in the decade preceding the pandemic there had been an upward trend in children in relative low income. Levels of children in absolute low income were also lower in 2021/22 than in 2019/20. Absolute poverty had been declining in the decade before the pandemic.

The IFS states that a decrease in the proportion of children living in poverty is largely responsible for the decline in overall absolute low income for all people:

The fall in absolute poverty over the two latest years has been driven by a decline in the proportion of children living in poverty. Prior to the pandemic, 25% of children were living in a household with income below the absolute poverty line. This fell to 23% in 2020/21, and remained at that level in 2021/22. This is consistent with the fact that families with children are more likely to be receiving UC [universal credit] than pensioners or those without children, and so their outcomes are more sensitive to UC policy.^[9]

Between 2020/21 and 2021/22, relative low income before and after housing costs for children increased; however, these changes were not statistically significant. There was no change between 2020/21 and 2021/22 for absolute low income, both before and after housing costs.

1.3.4 Pensioners

Figures 7 and 8 show levels of relative and absolute poverty for pensioners since 2010/11.

Figure 7. Percentage of pensioners living in households with relative low income, 2010/11 to 2021/22 

Figure 8. Percentage of pensioners living in households with absolute low income, 2010/11 to 2021/22 

Between 2010/11 and 2019/20 there was a gradual upward trend in relative low income for pensions, both before and after housing costs. The fall between 2019/20 and 2020/21 was partially reversed in 2021/22.

Absolute low income for pensioners, both before and after housing costs, had been broadly flat in the decade preceding the pandemic. As with relative low income, a fall between 2019/20 and 2020/21 was partially reversed in 2021/22.

Absolute and relative poverty, both before and after housing costs, rose for pensioners between 2020/21 and 2021/22. However, these changes were not statistically significant.

1.3.5  Working-age adults

Figures 9 and 10 show levels of relative and absolute poverty for working-age adults.

Figure 9. Percentage of working-age adults living in households with relative low income, 2010/11 to 2021/22

Figure 10. Percentage of working-age adults living in households with absolute low income, 2010/11 to 2021/22

There were no statistically significant changes in relative or absolute low income for this group between 2020/21 and 2021/22. The most recent relative low-income data, for 2021/22, is consistent with the stable long-term trend. There was a broadly downward trend in absolute poverty for working-age adults from 2011/12 to 2019/20.

The IFS explains that changes to the universal credit taper rate, allowing recipients to keep more of the benefit as their earnings rise, affected working-age non-parents much less than families with children:

The poverty rate of working-age non-parents is almost entirely insensitive to the taper rate, reflecting the fact that the nature of the means-tested benefit system results in few non-parents being entitled to benefits if they are working, and the fact that claimants without children are not eligible for work allowances (unless they also have a disability).^[10]

1.4 Material deprivation

The Department for Work and Pensions also provides data on people in ‘material deprivation’, combined with low income.^[11] ‘Material deprivation’ represents the extent to which people lack the ability to access key goods or services. The ‘material deprivation and low income measure’ defines low income as mean household income below 70% of the median, as opposed to below 60% for the relative low income measure.

1.4.1   Children

In 2021/22, 1.6 million children were in relative low income and material deprivation, 7% of children in the UK. 1% of parents could not afford a warm winter coat for their child and 5% of parents could not afford to keep their house warm. 29% of parents could not afford to make savings of £10 per month or more, and 8% could not afford for their child to do an organised activity once a week.

1.4.2 Working-age adults

In 2020/21, 3.5 million working-age adults were in material deprivation and relative low income in the UK. This was 9% of working-age adults in 2021/22. 5% of this group could not afford to keep their house warm and 6% could not keep up to date with their bills. 20% could not save £10 or more per month.

1.4.3 Pensioners

700,000 pensioners experienced material deprivation in 2021/22. Though this figure does not include low income, it includes goods and services pensioners could not access for reasons other than income, such as poor health. 1% could not access at least one filling meal a day or make sure their heating, electrics, plumbing and drains were working. 3% could not keep their house adequately warm, and 6% could not replace their cooker if it broke down. 25% could not go out socially at least once a month.

2. Benefits and other support

2.1 Universal credit

2.1.1 Overview

Universal credit is the primary way the government provides benefits for working-age people. It was introduced by the Welfare Reform Act 2012 and is gradually replacing previous benefits, known as ‘legacy benefits’. These are:

• child tax credit
• housing benefit
• income support
• income-based jobseeker’s allowance
• income-related employment and support allowance
• working tax credit

People can claim universal credit if they are on a low income or otherwise need help with living costs.^[12] This includes people both in and out of work, as well as people unable to work. Claimants must normally be between 18 and state pension age, though there are some exceptions for 16- and 17-year-olds. They must also not have more than £16,000 in savings and investments. There were 6.1 million people claiming universal credit in July 2023.^[13]

Most universal credit claimants are required to agree to a ‘claimant commitment’.^[14] This states what the claimant has to do to prepare for and look for work or to increase their earnings if they are already working. If claimants are already earning “as much as can be expected” in their current circumstances they are not required to try to increase their earnings.

People may not have any work-related requirements imposed if they have a disability or health condition that means they cannot work, if they care for a severely disabled person or if they are the lead carer for a child (depending on the age of the child). Work-related requirements can be temporarily reduced or removed for reasons including:

• bereavement
• carrying out a public duty, such as being a councillor
• being a victim of domestic abuse

Universal credit is made up of a standard allowance, adjusted by extra amounts and deductions. The standard allowance is calculated based on age and whether a person lives with a partner. Claimants can receive extra money if they have children or if someone in the household has a disability. If they are responsible for rent or a mortgage an amount is added for housing. They can also claim back a proportion of their childcare costs if they are working.

The current standard allowances range from £292.11 per month for a single person under 25 to £578.82 per month for a co-habiting couple where one person is over 25.^[15]

Universal credit is subject to a ‘taper’, whereby the amount a person receives decreases the more they earn. Universal credit claimants with children, or with health conditions or disabilities resulting in ‘limited capability for work’, can work a certain amount before the taper takes effect (a ‘work allowance’). The current taper rate is 55%. This means that for every pound a person earns (or earns over their work allowance, if applicable) their universal credit is reduced by 55p.

Universal credit is subject to the benefit cap, which was introduced in 2012. The benefit cap limits the total amount of benefits a household can receive. The government has stated that the purposes of the benefit cap are to:

• secure the economic well-being of the country by reducing spending on benefits and encouraging positive behavioural changes
• impose a reasonable limit on the total amount which a household can receive in welfare benefits to promote a fair and healthy society and maintain public confidence in the welfare system
• incentivise work—to reduce poverty and increase economic prosperity^[16]

Receiving certain disability-related, carers, or other benefits and allowances may entitle claimants to exemptions from the benefits cap.^[17]

2.1.2 Recent changes

The government has made some changes to universal credit in recent years. In response to the coronavirus pandemic it temporarily increased the standard allowance by £20 per week.^[18] This took effect in March 2020 and ended in September 2021. In November 2021 it increased work allowances by £500 per year and reduced the taper rate from 63% to 55%.

The IFS found that the £20 per week increase in universal credit reduced absolute poverty rates by 0.3 percentage points during the six months it was in place in 2021/22, or by 0.6 percentage points in annualised terms (affecting 379,000 people).^[19] The annualised effect of the changes to work allowances and the taper rate was a decrease in absolute poverty rates of 0.2 percentage points (133,000 people). The IFS states that this is because “changes to work allowances and the taper rate mainly benefit somewhat higher-earning households further up the income distribution and do not affect out-of-work households at all”.

The IFS states that the £20 uplift had a bigger impact on poverty partly because it was a larger policy.^[20] It cost approximately £6bn for a full year, compared with £3bn for the taper rate reduction. On a per-pound basis, however, the uplift had “a roughly 40% larger impact on poverty than the taper rate reduction”.

For further information on universal credit, see:

• Resolution Foundation, ‘Rates of change: The impact of below-inflation uprating on working-age benefits’, 14 October 2023
• Institute for Fiscal Studies, ‘Benefits and tax credits’, 1 February 2023
• House of Commons Library, ‘Reducing the universal credit taper rate and the effect on incomes’, 1 February 2022

2.2 Cost of living payments

In May 2022 the government announced a package of measures to help low-income households with the cost of living. This was in response to high inflation and pressures on household finances.^[21] In 2022, universal credit claimants, and people receiving certain other benefits, were sent two cost of living payments of £326 and £324.^[22] There were three further payments in 2023/24, of £301, £300 and £299.^[23] There have also been cost of living payments for people receiving certain disability allowances and payments, and for pensioners who receive a winter fuel payment.

2.3 Other measures

The government also provides further means-tested support for people on low incomes. These include:

• free school meals
• free childcare
• discounts on energy bills
• additional pension payments
• free prescriptions and support for other health costs
• mortgage interest support
• disabled facilities grants

For more information about these and other support measures, see the government’s ‘Benefits and financial support if you’re on a low income’ website.

3. Policy: Levelling up strategy

In February 2022 the government published ‘Levelling up the United Kingdom’, a white paper setting out how the government plans to reduce inequality between regions of the UK and improve living standards and well-being across the country. The strategy sets out four objectives, underpinned by 12 ‘missions’.^[24]

The first objective is to “boost productivity, pay, jobs and living standards by growing the private sector, especially in those places where they are lagging”. The missions under this objective relate to:

• living standards (pay, employment and productivity)
• research and development
• transport infrastructure
• digital connectivity

The second objective is to “spread opportunities and improve public services, especially in those places where they are weakest”. The missions supporting this objective are in the areas of:

• education
• skills
• health
• well-being

The third objective is to “restore a sense of community, local pride and belonging, especially in those places where they have been lost”. To achieve this, the government has set missions on:

• “pride in place”
• housing
• crime

The final objective is to “empower local leaders and communities, especially in those places lacking local agency”. The mission associated with this objective relates to local leadership.

Particularly relevant to poverty, as defined by income, are the missions relating to living standards and education. In addition, the government has stated that crime is a factor in perpetuating poverty.^[25]

3.1 Living standards: Pay, employment and productivity

The first of the government’s missions includes measures aimed at creating skilled and highly paid jobs. The government stated that businesses and private investment would be key to achieving this:

A vibrant, high wage, high skill economy requires above all unleashing private investment, encouraging enterprise and supporting a dynamic business sector that can create jobs, nurture skills and invest in innovation; secure adequate access to finance, particularly among rapidly-growing small and medium-sized enterprises (SMEs); and improve access to good infrastructure—physical and digital—allowing people to connect and collaborate.^[26]

To achieve this, the government said it would, among other things:^[27]

• increase small and medium-sized enterprise finance by providing more funding for the British Business Bank regional investment funds and the ‘Regional angels programme’, both of which provide finance for businesses with the aim of reducing economic imbalances, as announced in the 2021 spending review
• remove barriers to institutions such as pension funds investing in projects to support levelling up, including by asking the local government pension scheme to publish plans for increasing investment in projects to support local areas and using the UK Infrastructure Bank to increase local authorities’ capacity to invest to support local economic growth
• support “internationally mobile companies” and encourage foreign investment and trade through freeports, tax changes, the ‘Global Britain investment fund’, expanding the Office for Investment, and refreshing the export strategy
• help businesses to improve their “adoption and diffusion”, increasing their productivity by taking advantage of new technologies and processes and disseminating their knowledge
• increase productivity in manufacturing and support it to grow through sector-specific strategies and interventions, such as the ‘Made smarter’ programme

3.2 Education, skills and training

The levelling up strategy includes targets to improve primary school-level education outcomes and increase the number of people successfully completing high-quality skills training.^[28]

The government argues that good quality schools enable people to “access job opportunities and move up the career ladder, regardless of their characteristics, background or where they live”.^[29] To improve schools the government said it would:

• continue to encourage schools to join strong multi-academy trusts
• provide entitlement to early years professional development
• undertake further reforms to the schools national funding formula
• provide additional support to schools in authorities where educational attainment is weakest
• open further specialist 16–19 maths schools and new 16–19 free schools where they are most needed
• set up an online ‘UK national academy’ to enable the highest achieving students to access teaching beyond the curriculum
• invest more in services for children’s social care, such as ‘Family hubs’, ‘Start for life’ and the ‘Supporting families’ programme

These proposals and others were detailed in ‘Opportunity for all: Strong schools with great teachers for your child’, a schools white paper published in March 2022.

The government said it aimed to “support a high-wage, high-skill economy by building skills and human capital, particularly in places where they are weakest”.^[30] The paper includes many initiatives to improve skills and training, divided into the following areas:

• putting local employers at the heart of skills provision, ensuring technical skills provision better meets employers’ needs
• strengthening institutions, upgrading college estates and launching new providers
• lifelong training, ensuring people have access to flexible support to train, retrain and upskill throughout their lives
• work opportunities and progression, supporting people in work to progress in their jobs
• employment support for disabled people and people with health conditions, reducing health-related job loss

3.3 Crime

The white paper also includes an objective to reduce crime.^[31] The government argues this would have an effect on poverty because crime “erodes social capital, deters investment and job creation, entrenches poverty and undermines prospects for young people”. Initiatives in this area include:^[32]

• establishing ‘violence reduction units’ in which policing, criminal justice, local government, education, health and the community work together to address serious violence
• providing money to police and crime commissioners through the ‘Safer streets fund’, to prevent neighbourhood crime, crime in public spaces and violence against women and girls
• tackling illicit drug use through measures in ‘From harm to hope: A 10-year drugs plan to cut crime and save lives’, published in December 2021
• building on coordination in local areas to prevent drug users from committing crimes
• expanding electronic monitoring
• increasing the amount of unpaid work offenders do
• giving police more powers to tackle noise as a public nuisance^[33]
• publishing a plan for anti-social behaviour and quality of life issues; this was published in March 2023^[34]

3.4 Obligations under the Levelling-up and Regeneration Act 2023

Under section 1 of the Levelling-up and Regeneration Act 2023, the government is required to lay a statement of ‘levelling-up missions’ before each House. This must set out the objective the government intends to pursue to reduce geographical disparities in the UK within a specified period. It must also set out the metrics it will use to measure progress in delivering these missions. Section 3 of the act requires the government to prepare annual reports on the delivery of these missions, including an assessment of the progress made, actions taken and future plans to achieve them.

On 25 January 2024 the government laid the first of its levelling up mission statements.^[35] It reiterated the 12 missions from the white paper and set out how the government will measure progress on the missions, including those on living standards, education, skills and crime discussed above:

• living standards: measured by looking at gross value added per hour, gross median weekly pay and employment rates
• education: measured by percentage of primary children reaching the expected standard in reading, writing and maths in England and the percentage of children reaching the expected standard in the areas of England where education attainment is weakest
• skills: measured by number of adults who are successfully completing high-quality skills training
• crime: measured by numbers and levels of homicides, serious violence and neighbourhood crime

In a written statement to Parliament accompanying the mission statement, Jacob Young, parliamentary under secretary of state for levelling up, housing and communities, highlighted work the government had done towards achieving its missions in certain areas.^[36] On education, he said the government had:

[…] put in place targeted support in our 55 education investment areas across England to improve outcomes in the areas where attainment is weakest, including through the levelling-up premium, giving teachers up to £3,000 annually, aimed at helping schools to retain the best teachers in high-priority subjects. The government are also offering additional intensive investment in 24 priority education investment areas in England, including through the local needs fund, providing up to £42mn to support schools to boost pupils’ literacy, numeracy and attendance.

He also highlighted actions the government had taken to increase economic growth and innovation, such as opening free ports and allocating money from the levelling up fund, the future high streets fund and the towns fund.

4. Read more

• Joseph Rowntree Foundation, ‘UK poverty 2024: The essential guide to understanding poverty in the UK’, 23 January 2024
• House of Commons Library, ‘Poverty in the UK: Statistics’, 1 December 2023
• Child Poverty Action Group, ‘Ending child poverty: Why and how’, December 2023
• Poverty Strategy Commission, ‘A new framework for tackling poverty: The interim report of the Poverty Strategy Commission’, September 2023

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Cover image by Suzy Hazelwood on Pexels.