For decades, poverty has been measured by a household’s income relative to that of others. Although adjustments are made for housing costs and household size, the key metric is the amount of cash coming into a household. Public policy on poverty has followed this focus on household incomes. At UK level, the key levers for change are earnings, taxation and the benefits system. The Welsh Government, lacking these powers, has historically also focused on raising incomes through various employability programmes to help people into work and by benefit take-up campaigns. These programmes have increased the incomes of many individuals, although the size of their impact on headline poverty statistics is a moot point.
All this is changing. Soaring prices, especially the prices of food, heating and housing, are revealing that costs matter to households as well as incomes. It might not be how poverty is measured, but being able to afford bread, electricity and rent are fundamental to the lived experience of poverty. To illustrate the scale of the difference that rising costs are making, UK households in the bottom two income deciles would need to spend at least £38 a week more on energy in 2022-23 to consume the same amount as in 2019-20[1] (and that is before the October price rise). In income terms, a hike in the cost of energy of £38 a week translates into an extra four hours work at the National Minimum Wage or a 33 per cent increase in the Universal Credit couple allowance.
Tough though current circumstances are for households, they open up new areas for Welsh public policy. Crucially, the Welsh Government has many more powers in respect of costs than it does on income. For example, it sets the framework for rents for more than a quarter of a million socially-rented homes, decides who is eligible for schemes such as the Pupil Development Grant and replaces low-income families’ heating boilers. This is in addition to the many free universal services it provides, from prescriptions to concessionary bus fares for pensioners.
The Welsh Government has begun to flex its muscles to ease the financial pressure on households. Over the last two years, in response to the pandemic and the cost-of-living crisis, it has ramped up the provision of free services and made a growing number of cash payments to low-income households. We now have the Welsh Government Fuel Support Scheme, the Unpaid Carers’ Financial Support Scheme and the Welsh Government Cost of Living scheme, alongside established schemes such as the Discretionary Assistance Fund, Educational Maintenance Allowance, the Council Tax reduction scheme and Free School Meals.
The impact of these schemes on poverty should not be underestimated. For example, the Welsh Government has long provided a free school meal to eligible children, and from the start of the pandemic until August 2022 has paid £19.50 a week in lieu of a meal during school closures and holidays. The cash value of the scheme is just short of the recent £20 temporary increase to Universal Credit, which was estimated to have enabled 1 in 8 households receiving Universal Credit to meet their essential costs.[2] Conversely, the Welsh Government’s policy of increasing social rents at above-inflation rates is estimated to have pulled 40,000 social renters into poverty as housing costs have outpaced wages.[3]
What is important is that these are real and large-scale changes that have been implemented using existing powers and budgets – it has not needed the devolution of new powers or even new schemes. There is, then, potential to make a real and lasting difference to poverty by cutting households’ costs and providing cash supplements.
In my view that potential has yet to be fully realised. The steps taken to date are fragmented – simply navigating the various grants and allowances, with their different eligibility requirements, different application forms and different timescales, is not easy. The Bevan Foundation has called for the schemes to be integrated into a single Welsh Benefits System to ease the process for applicants, reduce the administrative burden and increase take up.[4]
And there are even more things that can be done outside a Welsh Benefits System, from controlling rents, to requiring employers receiving Welsh Government grants to pay the real Living Wage, to capping bus and train fares – to name just three.
Joining up these actions into an effective and coherent strategy that charts a clear path to reduce poverty will be key.
[1] Bolton, P. and Steward, I. (2022) Domestic energy prices, House of Commons Library Research Briefing 9491
[2] Mills, Z. (2021) The £20 uplift to Universal Credit is a first step on the path out of poverty, https://policyinpractice.co.uk/the-20-uplift-to-universal-credit-is-a-first-step-on-the-path-out-of-poverty/
[3] Joseph Rowntree Foundation (2020) Briefing: Poverty in Wales 2020 https://www.jrf.org.uk/report/poverty-wales-2020
[4] Bevan Foundation (2020) A Welsh Benefits System: how it can help solve poverty