Debate on Government in-work poverty, House of Commons, 28 June 2023

• Jobs ought to be a source of stability and progress – where our efforts directly translate into our rewards. Yet for a number of people in the UK, jobs simply aren’t working, and a growing number of people are becoming victims of poverty, while in work.
• Sixty-one percent of working-age adults in poverty lived in a household where at least one adult was in work, and eleven per cent of all workers lived in a household in poverty.
• The cost of living crisis has seen real terms pay fall at its fastest rate since 2001, when records began. As mortgage rates increase and rents rise, millions will be faced with an increased risk of falling into in-work poverty.
• Reducing in-work poverty requires significant work to address the wider determinants of low income and barriers to work, such as health. Government should foster an enabling environment by tackling barriers such as lack of quality housing, appropriate infrastructure, and green spaces to improve quality of life.
• A growing number of individuals grapple with job instability, with fluctuating pay and a lack of certainty in their weekly work schedule.
• Local leaders require the power and funding to work with partners to join up careers’ advice and guidance, employment, skills, apprenticeships, business support services and outreach in the community. The LGA’s Work Local model is a ready-made blueprint for making this happen.
• The early years system is complex for families to navigate and work must be done to ensure that the different elements of the early years offer work together coherently and streamline the system to improve its accessibility.
• The welfare system continues to hold people back from entering training or education because they will lose out on benefits. This is despite evidence that the lowest qualified people are at the highest risk of unemployment, insecure work and poverty.
• Government should reform eligibility rules to enable claimants to continue accessing benefits, including the childcare element of Universal Credit, while undertaking work-related training.
• Childcare can put even further strain on parents limited budgets and push them into poverty, meanwhile access to quality childcare, that is flexible and affordable, is vital to support children’s early development, to enable parents to work and it is central to tackling inequalities.
• Addressing the chronic housing shortage must also be a priority. Housing costs are among the most significant households must contend with and as such, are driving in-work poverty. The LGA continues to call on the Government to tackle the drivers of high housing costs by empowering councils to boost housing supply and build 100,000 high-quality, sustainable social homes a year.
• Mental load and mental health must also be considered, work is required to address the emotional and psychological burden carried by people living in poverty and social exclusion.

Research from the Joseph Roundtree Foundation (2020/21) finds that 61 per cent of working-age adults in poverty lived in a household where at least one adult was in work, and 11 percent of all workers lived in a household in poverty. The poverty rate for part-time workers was double that for full-time workers (18 per cent compared with nine per cent) and self-employed workers were twice as likely to be in poverty than employees (21 per cent compared with 10 per cent).

Cost of living crisis

Rising inflation, currently outstripping earnings growth, has the potential to increase levels of in-work poverty. The cost of living crisis has seen real terms pay fall at its fastest rate since 2001, when records began. As mortgage rates increase and rents rise, millions will be faced with an increased risk of falling into in-work poverty.

In-work poverty does not affect all groups equally, rather ethnic minorities have substantially higher in-work poverty and higher child poverty rates. Many ethnic minority groups are more likely to have the types of jobs and working patterns that are associated with in-work poverty.

Job insecurity

A growing number of individuals grapple with job instability, devoid of any certainty in their weekly work schedule. With many facing abrupt shift cancellations, leaving them with unmet expenses such as childcare and transportation. The volatile nature of zero-hours and short-hours contracts, though advantageous for some, exposes others to an unpredictable and fluctuating income stream. Uncertainty, coupled with frequent income fluctuations, is increasingly pushing people into a state of in-work poverty. 

There are further areas for concern within the labour market. While there has been an increase in the number of vacancies, there remains a need to determine whether the roles can be considered ‘good’ work. For example, do jobs provide enough regular or minimum hours, at a sufficient hourly pay rate, and good enough conditions to make them genuinely viable and preferable options?

For local communities, the benefits of 'good work' will be obvious. Better work means higher levels of local employment, a stronger local economy and greater economic prosperity. Increasing levels of 'good work' also has the potential to greatly support improved health and wellbeing among a local population and reduce pressures on associated support services. However, it is also critically important to ensure that those who aren’t in 'good work' – either because they are in jobs with poor conditions or aren’t in employment at all – are getting access to the skills and support to move into those jobs.

‘Gig economy’ work

In England and Wales, 4.4 million people are working for gig economy platforms at least once a week, research by University of Hertfordshire and BritainThinks reveals. Showing that 14.7 per cent of working adults surveyed now work via gig economy platforms at least once a week, compared to around 5.8 per cent in 2016 and 11.8 per cent in 2019. Almost half of gig workers in the UK also have a full-time job and by the end of 2022, 7.25 million people are expected to work in the gig economy.

That such a high proportion of gig economy workers also hold a full-time position paints a clear picture about that state of real wages, with many workers being forced into a second job to make ends meet. A single full-time job should provide individuals with enough to stay out of poverty, but increasingly that is not the case. Given the trends in ‘gig’ economy work it is entirely reasonable to assume that the number of people facing in-work poverty, if left unaddressed, will rise exponentially.

Poverty and public health

The unequal distribution of the social determinants of health, such as education, housing and employment, drives inequalities in physical and mental health, reduces an individual’s ability to prevent sickness, or to take action and access treatment when ill health occurs. These inequalities are complex and embedded in society, but they are also preventable. The dimensions of inequality are complex and overlapping as represented in the overlapping dimensions of health inequalities. Victims of in-work poverty are at a significantly higher risk of suffering ill health and jeopardising their already stretched budgets, it is essential that work is done to address the wider determinants of health. Government should foster an enabling environment by tackling barriers such as lack of quality housing, appropriate infrastructure, and green spaces to improve quality of life.

The LGA has developed a health inequalities hub to share case studies of how effective a local approach can be in addressing these pervasive issues.

Skills and employment support

Employment support serves as one of the most important measures for tackling poverty, helping people find well paid work, in good conditions. However, the current skills and employment system is unable to address current labour market or productivity challenges or tackle social and economic inequalities. Recent analysis by the LGA (April 2021) reveals that across England, around £20 billion is spent on at least 49 nationally contracted or delivered employment and skills related schemes or services, managed by nine Whitehall departments and agencies, and delivered by multiple providers and over different geographies. Programmes include the Levelling Up Fund, Towns Fund and Help to Grow, as well as training and back to work support such as Restart, Bootcamps, Sector based Work Academies and the National Careers Service. Funding is too short-term, and no single organisation is responsible for coordinating these programmes nationally or locally, meaning there is no accountability over how the totality of provision is improving local outcomes. This makes it difficult for local areas to plan, target and join-up provision, leading to gaps in provision or duplication. As a result, the system is also highly complicated to navigate for both individuals and businesses.

For too long local government has had limited routes to discuss employment and skills issues with central government. Funding for skills and employment support is short-term, fragmented and held centrally, and powers to affect change are too remote, unless a council is situated in an area with a devolution deal.

LGA’s view

The LGA’s Work Local model is a ready-made blueprint for making this happen. Work Local would give democratically elected local leaders the power and funding to work with partners to join up careers’ advice and guidance, employment, skills, apprenticeships, business support services and outreach in the community. For a typical medium sized authority, introducing a Work Local Model could improve employment and skills outcomes by about 15 per cent, meaning an extra 2,260 people improving their skills each year and an extra 1,650 people moving into work. This would boost the local economy by £35 million per year and save the taxpayer an extra £25 million per year.

There must be a cross-Government approach, working with local government, to training, employment support and job creation, to remove existing barriers to training and employment. In particular, DWP and Department for Education (DfE) need to work more closely to strategically align their policies and objectives, with the DWP prioritising skills and training more highly within its plan for jobs and employment support. This will be essential to supporting more people move into quality work and improve their life chances, closing the skills gap to fill labour market shortages, which will in turn support the local area to grow.

The risk of in-work poverty can be significantly mitigated with proper employment support for young people, providing them with essential support early, and setting them on the right path.

Childcare

While we welcome the Governments offer on childcare support, we must recognise that the cost of childcare can put even further strain on parents limited budgets and push them into poverty, meanwhile access to quality childcare, that is flexible and affordable, is vital to support children’s early development, to enable parents to work and it is central to tackling inequalities. By the time disadvantaged young people sit their GCSEs at age 16 they are, on average, 18.4 months behind their peers and around 40 per cent of that gap has already emerged by age five. Pre-school has almost as much impact on a child’s education achievement as primary school does, and the impact is even greater for those at risk of developing learning difficulties.

The early years system is complex for families to navigate, as there are a range of different entitlements on offer which vary depending on children’s’ age and families’ financial situations. The LGA would welcome the opportunity to work with the Department for Work and Pensions (DWP) and the Department for Education (DfE) to ensure that the different elements of the early years offer work together coherently and streamline the system to improve its accessibility.

LGA’s view

Funding for early entitlements is insufficient, which is impacting the quality and cost of childcare provision; the sustainability of providers, and the availability of good support for children with special education needs and disabilities (SEND). It is also resulting in higher costs for families. Long-standing challenges caused by the systematic underfunding of early years provision are now being exacerbated by the rising cost of living and inflationary pressures.

Wider reform of the childcare system is needed to provide a truly accessible and affordable offer for parents in every community. Out of advanced OECD countries, the UK invests the second least in childcare. Funding rates, including for universal early entitlements, need to be significantly increased to expand access to childcare and ensure all children have the best possible start in life.

To achieve their ambition of closing the gap between disadvantaged children and their more affluent peers, we are calling on Government to expanding the additional 15 hours of free childcare to all three and four-year olds, to ensure all children have equal access to quality early education. Government should also consider expanding the additional 15 hours of entitlements to parents/ carers who are studying or are in training, to enable people with childcare responsibilities to upskill, move into work and reduce welfare-dependency.

Councils dedicated early years teams have faced budget reductions which impacts on their ability to carry out vital improvement work with their local early years sector and provide direct support for parents and families.  If the Government is to achieve its aim of levelling up and providing children with the best start in life, councils’ early years teams need to be adequately resourced to provide support to their local childcare sector and directly support children, young people and families.

Welfare

The welfare system continues to hold people back from entering training or education because they will lose out on benefits. This is despite evidence that the lowest qualified people are at the highest risk of unemployment, insecure work and poverty. Government should reform eligibility rules to enable claimants to continue accessing benefits, including the childcare element of Universal Credit, while undertaking work-related training.

Councils’ range of front-line services play a vital role in protecting residents from rising costs; preventing the most vulnerable from falling into destitution and helping to build households long-term financial resilience. As leaders of place, councils are also essential in driving strong and inclusive local economies, through their economic development functions and measures like increasing the supply of affordable housing, integrating skills and employment provision, and prioritising vulnerable households to benefit from energy saving initiatives.

We cannot therefore support our most vulnerable residents through the cost-of-living crisis without adequately resourced and empowered councils.

LGA’s view

The mainstream benefits system should provide the principal safety net for low-income households, allowing councils to target additional discretionary support to those who are most vulnerable. We therefore continue to call on Government to provide a fair, accessible and sufficient safety net, that provides financial stability for low-income households and enables people who are unable to work to live well.

Food poverty

While rising prices have been felt by everyone, those on the lowest incomes have been the most severely impacted. Significant rises in energy prices in particular have left many of the poorest homes choosing between eating and heating. ONS data shows that 61 percent of people in the most deprived areas reported buying less food than in the previous year, compared to 44 percent in the least deprived areas.

Accessing food that is nutritious and healthy is an increasing challenging for those in our most disadvantaged communities. Poor diets are, per calorie, cheaper than healthier diets. Figures from the Food Foundation show that for households in the bottom 10 per cent of household income to follow healthy eating guidance, they would have to spend 74 per cent of their income on food. This underlines that for many low-income families, poor diets and food insecurity is not driven by ignorance or an inability to cook, but poverty.

The prevalence of obesity in children in the most deprived areas is already more than double that of those in the least deprived areas. The rising cost of living is therefore expected to have an ongoing knock-on impact on public health and deepen existing health inequalities.

Healthy Start scheme

The scheme was launched by the Government in 2006 with the aim of providing a nutritional safety net and improving access to a healthy diet for low-income families. However, the scheme is failing to support some of the most disadvantaged families, with uptake levels currently sitting around 50-60 per cent, while a comparable scheme in Scotland boasts around 80 per cent. While inflation continues to push essential goods out of reach for the poorest in society, the value of the schemes credits hasn’t risen since 2021 and the purchasing power is around 60 per cent weaker for fresh milk.

To address these issues the LGA is calling for the Government to:

• uplift the value of Healthy Start cards in line with the current inflation rate and commit to review the value every six months
• extend Healthy Start to children up to and including the age of 5, to close the current nutritional gap in support between healthy start and free school meals (FSM)
• expand Healthy Start to all households on Universal Credit
• shift from an “opt in” to an “opt out” registration system, to help remove any barriers families face when applying online
• invest in an awareness raising campaign to promote uptake of the scheme amongst eligible families, funded by underspend from the scheme
• make the Household Support Fund permanent, alongside increased flexibility to shift focus from short-term crisis support to investing in prevention

Social housing

Addressing the chronic housing shortage must be a national priority. Housing costs are among the most significant households must contend with and as such, are driving in-work poverty. The LGA continues to call on the Government to tackle the drivers of high housing costs by empowering councils to boost housing supply and build 100,000 high-quality, sustainable social homes a year. It is also vital that Government re-aligns Local Housing Allowance with at least the 30th percentile of local property values in the PRS, so low-income households can afford homes in the PRS and are not pushed into poverty or homelessness.

Funding remains one of the key barriers local authorities face in delivering more social homes. To meet our ambitions for social housing, there are a range of policy and fiscal interventions that councils need from Government:

• Continued investment in the One Public Estate programme, including further rounds of the Brownfield Land Release Fund to combat barriers which would otherwise make land unusable for development.
• A long-term rent deal for council landlords to allow a longer period of annual rent increases for a minimum period of at least ten years. This should include some flexibility for councils to address the historic anomalies in their rents as a result of the ending of the rent convergence policy in 2015.
• We welcome and support the announcement for councils to retain 100 percent of Right to Buy receipts for the next two years. We would like to see councils have the ability to set discount rates for Right to Buy sales locally and to retain 100 percent of sales receipts beyond the next two years.
• A reinvigorated multi-year national Affordable Homes Programme with an increased focus on delivering homes for social rent. This should reduce, if not eliminate the requirement for competitive bidding, with funding instead allocated to deliver social homes where they are most needed. Grant levels per home also need to be reviewed to maximise the number of schemes that are viable.
• Planning reform, including the removal of ‘viability’ as a material planning consideration and the removal of permitted development rights.

Elliot Gregory, Public Affairs and Campaigns Adviser

Email: [email protected]