Up to 200,000 households with people in work in Britain will be pushed into poverty by the government’s latest welfare reforms, according to a report published a day after Prime Minister David Cameron promised an “all-out assault on poverty”.
The Resolution Foundation, a think tank focussing on wages, said on Thursday an increase in the minimum wage would not offset the losses for many households caused by cuts to tax credits, which top up the earnings of the lowest paid, and other welfare supports.
The think tank specialises in issues affecting low-earning households, and its research work was cited by finance minister George Osborne when he announced the new minimum wage in July.
The Resolution Foundation said the number of working households in poverty — those who receive less than 60 percent of median household income — will rise by 100,000 next year as a result of the changes announced in July.
A further 100,000 working households could fall below the poverty line by 2020 after a second phase of cuts, pushing the total number of poor households to around 2 million, it said.
A spokesman for Britain’s finance ministry said the changes announced in July were fair and necessary and would only take spending on tax credits back to 2008 levels. “The best route out of poverty is work, not benefits,” he said.
Thursday’s report will be uncomfortable reading for Osborne, the front-runner to take over from Cameron, who has said he will stand down before the next election in 2020.
Boris Johnson, London’s mayor and another potential successor to Cameron, used a high-profile speech at the Conservative Party’s annual conference this week to urge the government to protect the most vulnerable, lowest-paid workers.
In his speech to the conference on Wednesday, Cameron said the introduction in April of the higher minimum wage was a “giant leap forward” in the push to help more people get out of poverty by working rather than relying on welfare.
But David Finch, senior economic analyst at the Resolution Foundation, said the government would make it harder for families to earn their way out of poverty by weakening work incentives in the benefits system.
An analyst at the Organisation for Economic Co-operation and Development told Reuters on Wednesday that austerity programmes imposed in a number of countries since 2010 had exacerbated inequality and could harm long-term growth.