Work 'no longer a route out of poverty' for millions in UK: Think tank

Resolution's warning, comes with the incumbent Labour government in turmoil

By Philip Aldrick

 

A typical lower-income British household would have to wait 137 years to see its living standards double, according to the Resolution Foundation — more than three times longer than in the past. 

 

Publishing a new analysis of living standards, the think tank said high rents and low pay mean work is “no longer a route out of poverty” for millions of UK families.

 

In-work poverty has replaced unemployment at the heart of Britain’s “economic malaise,” the report said, warning of further political upheaval unless the trend can be reversed.

 

Resolution’s warning, published Tuesday, comes with the incumbent Labour government in turmoil. Prime Minister Keir Starmer is under pressure to step down in light of his decision to appoint Peter Mandelson as US ambassador in December 2024, despite Mandelson’s links to sex criminal Jeffrey Epstein.

 

 

Chief of staff Morgan McSweeney was forced out on Sunday for influencing the decision, and Tim Allan — Starmer’s director of communications — subsequently quit on Monday “to allow a new Number 10 team to be built.” Rivals for the Labour leadership are circling, with markets fearing a more left-wing government that might increase borrowing or dent growth with higher taxes.

 

Resolution’s report, Unsung Britain, warned that a slowdown in living standards among the 13 million working-age households in the poorest half of the country is fuelling a turn to populism. Nigel Farage’s insurgent Reform UK party has jumped to the top of opinion polls, leaving Labour lagging behind. The concerns raised by the report also echo the “affordability” crisis gripping US politics.

 

“If politicians want to regain the trust of the families, they need to get the economy growing again so that pay rises pick up, while also putting their specific needs at the heart of efforts to turn the country around,” said Ruth Curtice, Resolution chief executive. “If they fail to do so, the economic malaise facing Unsung Britain risks fuelling further political disruption.”  

 

The report showed incomes for poorer families are set to grow just 0.5% a year across the 2020s. At that rate it would take 137 years for lower-income families to double their living standards. In the 40 years to the mid-2000s, the typical disposable incomes of working-age families in the poorest half of Britain doubled, growing 1.8% a year in real terms.

 

The income slowdown for the lower-paid began in 2005 and has been “driven by pay rises drying up.” The average gross annual earnings of someone in a lower income family has increased by £7,700 ($10,500) since the mid-1990s to £18,000 today – but nearly three-quarters took place before 2005, Resolution said.

 

As a result, in-work poverty has become a bigger issue than worklessness. Most households living below the poverty line today have someone in work – 55 per cent, up from 38 per cent in the mid-1990s. While the UK’s progressive tax system means poorer households pay a smaller share of their income in tax — at 12 per cent compared with 31 per cent for the most well-off — tenants with a private landlord spend on average 43 per cent of their household budget on rent.