Report from the Poverty Reduction Task and Finish Group Appendix 1. The Scope of Poverty in Darlington November 2013
Summary It is estimated that there are almost 11,000 working age adults, 4,500 children aged 0-17 and 3,000 pensioners in Darlington living in households with a disposable income of less than 13,312 per annum 1. In addition to this, more than 6,000 households are living on the verge of poverty, meaning that they are struggling to cope with increasing financial pressures. There are three major contributors to the number of people living in poverty both nationally and in Darlington: 1. Recession; 2. Austerity, and 3. Welfare Reform. Following the recession of 2008/09, prices rose by 17% (largely driven by the cost of food and energy. During this same period average earnings increased by 5%, a real terms decrease of 12% when compared with the costs of goods and services. The welfare reforms have the potential to have an impact on those in poverty. Analysis has shown that Darlington stands to lose 37 million from the local economy as a result of the welfare reforms. 1 Technically defined as living in poverty - 2 -
Introduction In response to a letter from Tim Grant, Principal of Darlington College, Darlington Partnership established an enquiry group to look at the issue of poverty within Darlington. The group had two clear objectives: 1. Assess the current scale of the problem within Darlington, and 2. Review the interventions currently available across the Borough. The group was led by Tim Grant with support from Seth Pearson, Partnership Director, and included involvement from groups such as Darlington Citizens Advice Bureau; Public Health; the North East Chamber of Commerce, and Darlington Credit Union. The Scope of Poverty In 2011/12 5.6 million working-age adults in the UK were living in households with incomes below 60% of the median disposable household income ( 256 per week, or 13,312 per annum). This figure increases to 7.9 million when housing costs 2 are taken into account i. 2.3 million children were living in households in the UK with incomes below 60% of the median disposable income. This figure increases to 3.5 million when housing costs are taken into account ii. 2.1 million pensioners in the UK were living in households with incomes below 60% of the median disposable income. However, this figure falls to 1.8 million when housing costs are taken into account iii. If the national picture was replicated in Darlington it would mean that there were: Almost 11,000 working age adults living in households with disposable incomes of less than 13,312 per annum; Over 14,000 working age adults living in household with disposable incomes of less than 11,440 per annum when housing costs are taking into account; More than 4,500 children aged 0-17 living in households with disposable incomes of less than 13,312 per annum; Over 6,500 children aged 0-17 living in households with disposable incomes of less than 11,440 per annum when housing costs were taken into account; 2 Housing costs are made up of: rent; water rates; mortgage interest payments; structural insurance premiums, and ground rent and service charges. - 3 -
More than 3,000 pensioners living in households with disposable incomes of less than 13,312 per annum, and Over 2,500 pensioners living in households with disposable incomes of less than 11,440 per annum when housing costs were taken into account; It is possible to look at the spread of poverty within Darlington. The chart below shows the percentage of children living in poverty (bar) and the number of children living in poverty (line) by ward. Figure 1: Percentage and number of children living in poverty by ward (2011) 40.0% 600 35.0% 500 % children inppoverty 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 400 300 200 100 No. children in poverty 0.0% - Hummersknott Mowden College Park West Sadberge and Whessoe Heighington and Coniscliffe Faverdale Hurworth Middleton St George Haughton North Harrowgate Hill Cockerton East Lingfield Pierremont Haughton West Bank Top Central Northgate Lascelles Cockerton West Haughton East North Road Eastbourne Park East % Children in Poverty No. of Children Living in Poverty Source: HMRC As well as looking at the spread of child poverty, it is also possible to look at the cost of child poverty. Research commissioned by the Child Poverty Action Group, and carried out by Loughborough University; found that child poverty costs approximately 29 billion per annum iv. These costs are broken down as follows: 15 billion spent on services to deal with the consequences of poverty, such as increased NHS and school costs; 3.6 billion lost in tax receipts from people earning less as a result of having grown up in poverty; 2 billion spent on benefits for people spending more time out of work as a result of having grown up in poverty, and 8.5 billion lost to individuals in net earnings. In addition to estimating the national cost of child poverty, Loughborough University also estimated the costs for each local - 4 -
authority. They estimated that child poverty would costs Darlington 62 million per annum. Research recently commissioned by the Guardian newspaper, and undertaken by Experian highlighted the issue of household who were currently not in poverty, but were on the verge of poverty. The research used population segmentation to model the number of households within certain categories who were at greatest risk of falling into poverty. Overall there were more than 3.6 million households within England who were on the verge of poverty. The analysis undertaken on Darlington showed that there were almost 6,000 households on the verge of poverty, roughly 13% of all households within Darlington. - 5 -
Researching Poverty Following the previous Government s commitment to eradicate child poverty by 2020, the recession of 2008/09, and the austerity programme implemented by the current Government, research into the impacts and effects of poverty, and the experiences of those living in poverty has been widespread. The Social Mobility and Child Poverty Commission The Social Mobility and Child Poverty Commission is the group which holds the Government to account regarding its progress. The Commission is chaired by Alan Milburn and published its first report in October 2013 v. The report highlights four key challenges in reducing child poverty and increasing social mobility: 1. Economic; 2. Fiscal; 3. Earnings, and 4. Cost of living Analysis undertaken by the Commission shows that the process by which fiscal consolidation has been implemented is placing an unfair burden on the poorest households including those in low paid work. The Commission also found that the most effective way of tackling child poverty is through getting more parents into work, supporting them to stay in work, and helping them to progress into jobs that pay enough for them to escape poverty. However, this is increasingly difficult given the shift towards part time work and insecure forms of employment. Rising Cost of Living A large amount of research has focused on the rise in the cost of living, and the real terms reduction in earnings. Between 2008 and 2013 prices rose by 17% according to consumer price index 3 (CPI). This increase has largely been driven by increases in the cost of food and energy vi, for example food prices in April 2013 were 4.6% higher than at the same time a year ago. Energy prices rose by 2.2% in the same period vii. Research conducted by the Joseph Rowntree Foundation (JRF) found that although the cost of living rose by 17% between 2008 3 CPI measures changes in the price levels of a basket of goods and services purchased by households - 6 -
and 2013, the cost of the minimum income standard (MIS) 4 increased by 25%, and the cost of childcare rose by 37% viii. Despite these increases in the cost of living, average earnings have increased by only 5% from 2008 ix a real terms 12% decrease on CPI, and a real terms 20% decrease on MIS. In addition to this, as of April 2013 benefits will rise by 1% per annum, which is 1.5% behind inflation x, meaning that incomes for those on benefits will effectively be cut when compared with the cost of living. As a result of the rising cost of living, and the real terms reduction in average earnings, the number of children in relative poverty is expected to rise from 2.6 million in 2009/10 to 2.9 million in 2015/16 and 3.3 million by 2020/21 xi. The number of working age adults in poverty is expected to rise from 5.7 million in 2009/10 to 6.5 million in 2015/16 and 7.5 million by 2020/21 xii. Costs of Raising a Child The original letter that led to the formation of the enquiry group related to students attending college having not eaten properly. It is therefore relevant that we look at the costs associated with raising children within the UK. In 2012 the Child Poverty Action Group (CPAG) calculated the costs of raising a child in the 21 st Century xiii. In 2013, CPAG refreshed this calculation xiv, the results of which are detailed below: Scorecard: cost of a child in 2013 A. How much extra a child adds to the family costs, and how much benefits contribute to this Minimum additional cost of a child (averaged for first and second child) Couple Lone parent 1. Basic cost* over 18 years 81,772 90,980 2. Cost over 18 years including childcare 148,105 161,260 3. Percentage of basic cost covered by child benefit 19% 17% 4. Percentage of basic cost covered by child benefit plus maximum child tax credit 85% 77% B. The extent to which Net income* as a families have enough to percentage of minimum cover the minimum cost of family costs (family with living two children aged 3 and 7) Couple Lone parent 4 MIS shows the cost of items and activities that the public think is needed for a socially acceptable standard of living in the UK. - 7 -
5. Not working 58% 61% 6. Working full time on the national minimum wage 83% 87% ( 6.19 per hour) 7. Working full time on the median wage ( 11.26 per 106% 92% hour) * Net of rent, childcare and council tax. The calculation shows that although the basic costs of a child are largely covered by child benefit and child tax credit, when the minimum cost of living for the full family is added on, income from benefits covers 58% of a couple s costs, and 61% of a lone parent s costs, while full time work on the minimum wage covered 83% of a couple s costs, and 87% of a lone parent s costs. Income for couple s in full time work on the median wage can more than cover the costs of the full family, while a lone parent in full time work on the median wage, can over 92% of the costs. Financial Impact of Welfare Reform The Welfare Reform Act was introduced in February 2011 and received Royal Assent in March 2012. The Act introduced a number of changes to the welfare system; including: The introduction of Universal Credit; Stronger penalties for fraud and error; A new "claimant commitment"; Phasing out of Disability Living Allowance and replacement with Personal Independence Payment; Reform of Housing Benefit, including introduction of underoccupancy penalty; Changes to the Social Fund, including greater power to local authorities; Reform of Employment and Support Allowance, and Changes to child support. The reforms are to be phased in between April 2013 and 2015. In addition to the impact assessments produced by the Department of Work and Pensions (DWP), three impact assessments have been produced to demonstrate the impact of the reforms in Darlington and across the country. These assessments take into account changes that were announced by the previous Government, as well as changes announced as part of the Welfare Reform Act. - 8 -
The Impacts of Welfare Reform in Darlington xv was produced in March 2012 by Darlington Borough Council to map and model the predicted impacts of the welfare reform agenda. The impact assessment predicts a per annum loss of approximately 14 million to the Darlington economy based upon DWP impact assessments and local data. Hitting the Poorest Places Hardest xvi was produced in April 2013 by the Centre for Regional Economic and Social Research (CRESR) based at Sheffield Hallam University. As with The Impacts of Welfare Reform in Darlington, CRESR used local data as well as date from impact assessments produced by DWP. Hitting the Poorest Places Hardest estimates a loss to Darlington s economy of 37 million per annum, equivalent to 546 per working age person within the Borough. In January 2012 the Office of the Children s Commissioner published an impact assessment of the Welfare Reform Bill xvii, highlighting how the Bill would impact upon the rights of children as set out in the United Nations Convention on the Rights of the Child (UNCRC). The likely impacts highlighted by the Children s Commissioner included: Increase in child poverty; Children losing family homes as the become unaffordable; Disproportionate impact on some children from black and minority ethnic (BME) groups; Incentivising family breakdown; Disproportionate impact on disabled children; Safeguarding implications, and Impact on families who are victims of domestic abuse. Information gathered from the DWP impact assessments and the impact assessments carried out by Darlington Borough Council and CRESR have highlighted that the welfare reform agenda will disproportionately affect certain groups, including: Children and young people; Disabled people and their carers; Lower income families, and Lone parents. Experiences of People in Poverty - 9 -
In addition to calculating the financial impacts of recession, austerity and welfare reform, research has been undertaken to gather the experiences of people affected. One such project by JRF tracked the impacts of the recession and poverty in Bradford xviii. Although the recession had not created any new problems for those interviewed, it did make the existing problems more acute. Those interviewed highlighted the impact that energy and food costs had on their lives, describing a choice between heating their home and having a meal. As well as the increased costs of energy and food, a large number of those interviewed highlighted the inability to save money to cover unforeseen circumstances as an issue. Many felt that they could manage on their current income, but emergency situations and repairs of household goods was pushing their budget to breaking point. While the JRF research in Bradford looks at the impact the recession has had on deprived communities, a report published by the Northern Housing Consortium (NHC) xix in September 2013 looks at the impact that the welfare reform agenda has had on social housing tenants in 6 areas within England. The project will follow 74 households over 18 months to assess the impact of the reforms. A number of those interviewed were concerned about their ability to purchase healthy food and were worried about coping on reduced budgets for food spending. Some of the strategies for coping with increasing food costs and reduced incomes were to stop buying meat as it was too expensive, or to go to supermarkets at certain times of the day when products were being reduced to make it more affordable. The majority of participants feared that their levels of debt would increase as a result of welfare reform, with at least one participant saying that they needed to keep the loan shark happy, as they relied on him to survive. Participants were also fearful that illegal lenders and doorstep lenders would begin to target their estates as incomes decreased and the costs of living increased. 88% of the participants thought that the welfare reforms would adversely affect their health and wellbeing; with some participants mentioning that they were going without to ensure that their children had adequate packed lunches. The findings of the Real Life Reform project were backed up by a report by the New Economics Foundation (NEF) which highlighted - 10 -
that the number of people living in food poverty is now estimated to be over 4 million xx. Support Services At the same time that the living costs are increasing at a higher rate than average incomes, the amount of money available for support services, and the capacity of support services to provide support has decreased xxi. This is despite an increased demand on services xxii. Demand for food banks has more than doubled, from 61,000 to 128,000 between 2010/11 and 2011/12. This is expected to increase further as a result of welfare reform xxiii. Charitable trusts have expressed concern that demand for services will increase as a result of welfare reform and as a result of poorly designed local social fund schemes 5, and a reduction in the allocation xxiv, with 270 million spent in 2011/12, and 178 million allocated in 2013/14; a reduction of 92 million. End Notes i Households Below Average Incomes, Office for National Statistics, June 2013. ii Ibid iii Ibid iv R Farthing, 2013, Local Authorities and Child Poverty: Balancing threats and opportunities, Child Poverty Action Group v A Milburn, 2013, State of the Nation 2013: Social mobility and child poverty in Great Britain, Social Mobility and Child Poverty Commission vi D Hirsch, 2013, The Cost of a Child in 2013, Child Poverty Action Group vii J Slay and J Penny, 2013 Surviving Austerity, New Economics Foundation viii D Hirsch, 2013, A Minimum Income Standard for the United Kingdom in 2013, Joseph Rowntree Foundation ix Ibid x D Hirsch, 2013, The Cost of a Child in 2013, Child Poverty Action Group xi M Brewer, J Browne and R Joyce, 2011, Child and Working Age Poverty from 2010 to 2020, Institute for Fiscal Studies xii Ibid xiii D Hirsch, L Sutton and J Beckhelling, 2012, The Cost of a Child in the Twenty-first Century, Child Poverty Action Group xiv Hirsch, D, 2013, The Cost of a Child in 2013, Child Poverty Action Group xv J Slack and J Kenshole, 2012, The Impact of Welfare Reform in Darlington, Darlington Borough Council xvi C Beatty and S Fothergill, 2013, Hitting the Poorest Places Hardest: the local and regional impact of welfare reform, Centre for Regional Economic and Social Research xvii A Child s Rights Impact Assessment of the Welfare Reform Bill, Office of the Children s Commissioner, 2012 xviii B Athwal, L Brill, G Chesters and M Quiggin, 2011, Recession, Poverty and Sustainable Livelihoods in Bradford, Joseph Rowntree Foundation xix Real Life Reform Report 1, Real Life Reform, 2013 xx J Slay and J Penny, 2013, Surviving Austerity, New Economics Foundation 5 Darlington s fund is currently under review. - 11 -
xxi B Athwal, L Brill, G Chesters and M Quiggin, 2011, Recession, Poverty and Sustainable Livelihoods in Bradford, Joseph Rowntree Foundation xxii J Slay and J Penny, 2013, Surviving Austerity, New Economics Foundation xxiii D Gibbons, 2013, Local Welfare Provision, Low Income Households and Third Sector Financial Services Provision, Centre for Responsible Credit xxiv Ibid - 12 -