Ordinary households face a gruelling recovery that will be costlier and more painful – in terms of jobs and household income – than the actual recession from which we are emerging.
Research financed by the Joseph Rowntree Foundation, and conducted by the independent think tank the Institute for Fiscal Studies, makes grim predictions of child and adult poverty over the next few years for families on and below median incomes.
At the same time, the Chartered Institute for Personnel Development calculated that job losses in the public sector are running at five times the original projection by the Office of Budget Responsibility.
The CIPD called on Chancellor George Osborne to announce in next month’s pre-Budget statement that the government will slow down or stop future job cuts as a response to the flat-lining economy.
A survey of 6,700 businesses by the British Chambers of Commerce found the British economy deteriorated in the third quarter of this year and appears to be stagnant as firms struggle for cash flow while banks are wary to lend or extend facilities, hurting capital investment in plant and machinery.
Declining consumer confidence and weaker exports are also depressing the economy across the board from manufacturing to services.
The CIPD, whose findings were predictably queried by the Treasury, said public sector job losses are happening much faster than originally anticipated and it now predicts 600,000 jobs shed between 2010-11 and 2015-16 – 200,000 more than originally forecast.
Its chief economic advisor Dr John Philpott said: “Public sector job cuts in this context are a false economy, adding to unemployment and in turn hindering rather than helping the task of fiscal deficit reduction.
“A more sensible course would be to delay public sector job cuts to the end of this parliament and if necessary into the next, thereby enabling them to be absorbed more easily without nasty macroeconomic side-effects.”
Dr Philpott warned against “the own goal of cutting public sector jobs at a time of high and rising unemployment”.
The IFS/Joseph Rowntree findings estimate that between 2012/13 people on average incomes and below will feel the effects of the largest decline (7 per cent) in real incomes in 35 years while absolute poverty is forecast to rise by about 600,000 children and 800,000 working-age adults.
The net direct effect of the coalition government’s tax and benefit changes will be to increase both absolute and relative poverty because changes such as the switch from Retail Price Index to Consumer Price Index to calculate means-tested benefits more than offset the impact on poverty of the planned Universal Credit benefit.
Absolute and relative child poverty are forecast to be 23 per cent and 24 per cent in 2020/21 respectively. These compare to the 5 per cent and 10 per cent targets in the 2010 Child Poverty Act – the highest rate of absolute child poverty since 2001/02 and the highest rate of relative child poverty since 1999-2000.
People are considered to be below the poverty line, or living in relative poverty, if they have a household income which is below 60 per cent of the median national income.
The IFS said that by this measure 2.2 million children, 17 per cent, and two million working age adults were living in absolute poverty in 2009-10.
It adds that there will be 2.5 million working-age parents and four million working-age adults without children in absolute poverty by 2013.
