Only halfway

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Families are only halfway through a two-year cost-of-living squeeze

By Lalitha Try, Resolution Foundation

Britain is in the midst of a living standards disaster. Inflation reached its highest level in 41 years in 2022 – and remains at double-digit levels. Pay packets are shrinking rapidly in real terms. The Government has stepped in with a package of cost of living support that is set to cost £58 billion over the course of this year (2022-23). But even that isn’t enough to prevent typical household incomes from falling by 3%.

To deepen our understanding of where this crisis leaves Britain, our Living Standards Outlook 2023 uses a new YouGov survey of 10,000 adults to explore how households are coping. In addition, new RF modelling helps us to understand what the latest economic developments and planned government policy mean for household incomes and poverty this year and beyond.

We find that, as of last November, 23% of adults (equivalent to 12 million people in total) said they couldn’t afford to replace or repair major electrical goods (up from 8% pre-pandemic), while 11% (equivalent to six million people) said that they were hungry but didn’t eat because of a lack of money in the past month (compared with 5% pre-pandemic).

With the crisis currently being driven by the higher cost of essentials like food and energy, lower-income families are finding it hardest to cope. Among people in the poorest fifth of working families, 32%  say they are not confident about their finances as a whole over the next three months (compared to 19% overall), while 34% say their health has been affected by the rising cost of living (compared to 21% overall). We will ask these questions again later this year, to see if people are faring any better or worse.

What about the wider outlook for living standards? We found that typical household disposable incomes for working-age families are on track to fall by 3%  this financial year, and by 4%  next year, with the two-year cost-of-living squeeze set to leave families £2,100 worse off. The scale of this fall is considerably tighter than the post-financial-crisis squeeze of 5%  between 2009-10 and 2011-12.

This outlook is bleak, but government support has responded well to the nature of the cost-of-living crisis, by rightly prioritising support at those most in need. Because of this, and with the exception of the very richest households who have seen their savings income soar, the scale of income falls will be smaller for poorer families than richer ones.

But there is still more the Government can do more to protect households from the brunt of the crisis. The Government should look at the Cold Weather Payments, and consider whether the trigger temperature should be raised, so that they are paid more often, and eligibility extended to more working-age households receiving benefits. In the medium-run, better insulation is key to reducing household energy bills and easing the transition to net zero, but this requires a greater focus on UK’s homes’ inefficient walls.

Lalitha Try, Res Fnd for GM Poverty Action

Lalitha Try

Families with three or more children are heavily affected by the two-child limit, the benefit cap (the inflation increase this year is its first nominal increase since 2013), and the post-pandemic freeze in LHA rates. All of these policies should be reviewed. And linking Cost of Living Payments to receipt of security benefits or the state pension makes it more important than ever that those entitled to those benefits claim them, and the Government (and other organisations) should be encouraging take-up of means-tested and disability benefits. The UK Government should also mandate a minimum provision of crisis support by local authorities, if necessary with ring-fenced funding.

The outlook for living standards is bleak, but uncertain. It could improve, or worsen. The government should be ready to respond to either of these outcomes.


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Review of 2022

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Graham Whitham, Chief Executive Officer, GMPA

This has been a challenging year for the fight against poverty, with factors outside of our control here in Greater Manchester acting to squeeze incomes and put more households at risk of financial hardship. As we have been saying all along, there has been a poverty crisis in our city region and other parts of the UK for years. For many, the cost-of-living crisis is compounding an already dire situation in which it is impossible to make-ends-meet. We have seen first hand this year, just how challenging things are for people.

In spite of these challenges, Greater Manchester continues to step up. We now have well over 500 accredited Real Living Wage employers in the city-region – a fact we celebrated during Living Wage Week in November.

There’s more political will to tackle poverty than ever, with more of our ten councils working with partners to introduce anti-poverty strategies.  We’ve been pleased to see Bury Council, among others, adopting many of our recommendations in their strategy. Others, such as Salford and Tameside councils are voluntarily adopting the socio-economic duty, something GMPA is encouraging all public bodies to do. The duty is all about understanding the impact of decisions on people experiencing poverty.

Effective implementation of the socio-economic duty requires organisations to take into account the views, experiences, expertise and perspectives of people with lived experience of socio-economic disadvantage. Doing this effectively means going further than simply consulting people. Poverty Truth Commissions are a positive way of embedding the principles of meaningful engagement and we have been proud to run the Tameside Poverty Truth Commission (TPTC), which came to and end in November, at GMPA. You can read more about the TPTC and the recommendations coming out of it later in this newsletter.

There has also been growing interest in the ‘cash-first’ approach to poverty that GMPA and others, including the Independent Food Aid Network and Trussell Trust, have been advocating for. This means defaulting to giving people on a low income money as opposed to ‘in-kind’ support such as food parcels and energy vouchers. We know that this is the most effective way of supporting someone experiencing or at risk of financial hardship. It has been good to see Wigan and Oldham councils, among others, championing this approach.

On this theme, our Cost-of-living Crisis Conference in October brought over 100 delegates from across the city region and 30 speakers from across the UK together to focus on local and practical monetary response to poverty. As well as exploring cash-first approaches, sessions focussed on benefit uptake, the Real Living Wage and supporting people to avoid problem debt.

At GMPA, we have continued to grow the team so we’re better able to support the fight against poverty across the city-region. Our programme offer in 2022 has included Money Matters. Money Matters is piloting the provision of benefits and debt advice in schools. It is helping us to reach dozens of parents in the Stretford area who might otherwise not have sought help. The financial gains (i.e. through additional benefits claimed) we have secured for parents through Money Matters currently stands at £50,000, with several months of the programme left to run.

We have also expanded our Money Advice Referral Tool (already in place in Oldham and Tameside) programme to a further four boroughs (Bury, Manchester, Trafford and Wigan). The Tool describes all the places that people can go for advice and other income maximisation support.

We have seen the difference the toolkit makes for organisations and service users. For example, a frontline family intervention worker in Tameside had been working with a client who is not allowed to hold a bank account presently. Through utilising the toolkit, the family intervention worker was able to refer the client to an organisation that could support her. In doing so, she disclosed she struggled with debt problems, and using the toolkit the family intervention worker was able to facilitate debt reconciliation.

Throughout 2022 we have continued to support the network with our regular newsletters. In addition, one of our biggest activities this year has been the launch of the Greater Manchester Poverty Monitor 2022. This resource details statistics relating to poverty from across the city region. Where possible, data is presented at a ward or neighbourhood level. We know organisations have been using this data to make a case for their services, target support and residents and inform funding bids. Supporting the network in this way is central to what we do – please keep letting us know how you are using the Monitor.

Finally, GMPA, along with others, continue to make our voice heard on the need for national action to end poverty. This includes increasingly raising our voice in the media.

We know that to end poverty in Greater Manchester will require action from national government. It is not sustainable to have millions of people struggling to afford food or put the heating on. Nor is it sustainable to expect charities and local public sector organisations to pick up the pieces. Regardless of what is happening with inflation or the wider economy, everyone should be able to afford a decent standard of living year in, year out. It should be a national ambition, led by central government to make that a reality.

Thank you for your ongoing support.

With best wishes for the festive season and for 2023.

Graham and the team at GMPA


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