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The Hard Material Challenges of Extreme Poverty, Destitution and Housing to Wellbeing in the United Kingdom

Nicholas Sowels
p. 123-146

Résumé

This article1 explores the interaction between inequality, poverty and wellbeing in the UK, particularly in recent years – post-Covid and Brexit – noting that the decades-long decline in absolute poverty in the UK has levelled off since the global financial crisis (2007 to 2009). This is a major change, reflecting the fact that British society today is no longer becoming better-off. Ironically, at the same time, income inequality and relative poverty levels have been fairly stable since the 1990s (following big rises during the Thatcher years of the 1980s), though the “Top 1%” of income owners have continued to pull away. The article points out that some significant policies – notably the efforts to tackle child policy by New Labour (1997 to 2010) and the widespread support for household incomes during the Covid pandemic – did temporarily alleviate some aspects of poverty. However, subsequent phases of public spending control and/or a shift to more conventional policies led to the return to pre-existing conditions: most worryingly, there has been a notable increase in “destitution” since the late 2010s. The article also examines trends in housing costs, which are uniquely taken into consideration in British income inequality and poverty statistics, pointing to some structural trends in housing that strongly undermine household wellbeing.

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Introduction

  • 2 Mark Suzman, “The Roots of the Global South’s New Resentment: How Rich Countries’ Selfish Pandemic (...)
  • 3 Carolina Sánchez-Páramo, “COVID-19 leaves a legacy of rising poverty and widening inequality”, Worl (...)

1The Covid pandemic was a major, historical shock to economies and societies across the world. It led to unprecedented restrictions on personal mobility, massive government interventions in the economy (at least in the industrialised world), and fuelled the polarisation between the rich countries and the “Global South”.2 It has been estimated that across the world 97 million people fell below the $1.90 per day threshold poverty (measured as this dollar income at purchasing power parity in 2011 dollars).3 This reversed a decades-long trend of declining, global absolute poverty. By contrast, in the United Kingdom (UK), public income support between March 2020 and September 2021 actually reduced income inequalities and slightly dulled some of the worst hardship faced by households. But this did not last, and “destitution” (defined below) especially rose between the late 2010s and the mid-2020s.

  • 4 Louise Dalingwater, Iside Costantini and Nathalie Champroux, “Wellbeing : Political Discourse and P (...)
  • 5 Angus Deaton received the Nobel prize for economics in 2015 “for his analysis of consumption, pover (...)
  • 6 Angus Deaton, The Great Escape: Health, Wealth, and the Origins of Inequality (Princeton and Oxford (...)
  • 7 Ibid., p 17.
  • 8 Ibid., p 49.
  • 9 Ibid., p 53, and Daniel Kahneman and Angus Deaton, “High income improves evaluation of life but not (...)

2How does all this connect to the question of wellbeing? In a summary article discussing the notion of wellbeing in political discourse, Dalingwater et al. point to how “subjective wellbeing or happiness” became a key focus of public policy in the second half of the 20th century, while noting “that there is still no commonly agreed definition of wellbeing”, which is increasingly individualistic in the neoliberal discourse.4 For his part, Nobel laureate5 and specialist of welfare, Sir Angus Deaton, “use[s] the term wellbeing to refer to all of the things that are good for a person”. Specifically, “[w]ellbeing includes material wellbeing, such as income and wealth; physical and psychological wellbeing, represented by health and happiness; and education and the ability to participate in civil society through democracy and the rule of law”.6 Significantly, Deaton points to the important distinction between “life satisfaction and happiness: the former is an overall judgement about life that comes from consideration, while the latter is an emotion, a mood, or a feeling, which is part of experiencing life”.7 Deaton also asserts that “the residents of richer countries systematically value their lives more highly than those of poorer countries creat[ing] a strong assumption that growth is good for the way people feel about their lives”.8 However, Deaton also notes that “there is a much weaker relationship” between happiness and national income: looking specifically at the United States, his research with Daniel Kahneman (another Nobel Laureat) found that “[p]overty generates misery, but beyond a certain point (about $70,000 [at prices in 2010]), additional money does nothing to improve happiness, even though those with more money report they have better lives”.9

  • 10 Abraham Maslow “A Theory of Human Motivation”, Psychological Review 50 (1943), pp. 370-396.

3Another way of looking at wellbeing is to draw on the well-known “hierarchy of needs” proposed by the American psychologist Abraham Maslow in 1943. Maslow argued that “human needs arrange themselves in hierarchies of pre-potency. That is to say, the appearance of one need usually rests on the prior satisfaction of another, more pre-potent need”. Accordingly, humans are first motivated to satisfy “physiological” needs, stemming from our bodies’ “automatic efforts to maintain a constant, normal state of the blood stream”. As a result, “[a] person who is lacking in food, safety, love and esteem would most probably hunger for food more strongly than for anything else”. Almost as important then is the need for “safety”, as “[p]ractically everything looks less important than safety”. For Maslow, the hierarchy subsequently includes “love needs” (including affection and belongingness), “esteem needs” (associated with self-confidence, worth, strength and capability), and finally “the need for self-actualisation” (of becoming “more and more of what one is”).10

  • 11 Stewart Lansley, The Richer, The Poorer: How Britain Enriched the Few and Failed the Poor – A 200-Y (...)

4Connecting these considerations of wellbeing to standard measures of inequality and poverty is partly a question of interpretation given the range of factors involved, and it is politically sensitive. This explains why government statistics generally use the term “low income” rather than “poverty”. Low income is more easily measured, and avoids the broader considerations and connotations of the term “poverty”, which Stewart Lansley has called a “no-go area” for government, recalling that Mrs Thatcher once conveniently told the House of Commons that “there [was] no government definition of poverty”.11 Here, following others like the Joseph Rowntree Foundation (JRF), I use the terms “poverty” and “low income” interchangeably, to provide what can only be a partial assessment of inequality, poverty and wellbeing. The first section thus starts by presenting the most recent findings given by the Department of Work and Pensions (DWP) in its annual report on Households Below Average Income Survey (HBAI), released in March 2024. The next section will examine the levels of “deep” and “very deep poverty”, as well as “destitution” in the UK, drawing on work by the JRF. The third section then looks at key issues related to housing inequality, as this figures exceptionally in UK low-income and inequality statistics, and how falling homeownership may be impacting wellbeing. The last section concludes.

Inequality and low incomes in Britain’s lower growth environment

  • 12 Data collection was better for the 2023 survey as it was largely based on face-to-face interviews w (...)
  • 13 Office for Budget Responsibility, Brexit Analysis, latest update 17 April 2023, https://obr.uk/fore (...)

5The Department of Work and Pensions releases a report each year on “Households Below Average Income” (HBAI), normally in March, which draws on the annual Family Resources Survey. The latest version of this survey provides a fuller picture of the consequences of the Covid pandemic and Britain’s post-Brexit, lower-growth environment than did the surveys of 2022 and 2023. This is partly due to better data collection.12 But it also stems from the fact that the massive government intervention during Covid (notably household income support of the “furlough” scheme and the £20 benefits “uplift” for Universal Credit benefits), followed by the energy price cap (in 2022 especially) has receded. The survey thus occurred under more “normal” circumstances. Similarly, the immediate and main consequences of Brexit – running from the referendum in 2016 to when Britain left all the economic arrangements of the European Union at the end of 2020 – have likely now played out. For this, the standard reference is the estimate by the Office for Budget Responsibility (OBR) that Brexit will reduce long-run productivity by 4 % relative to remaining in the EU, and that two-fifths of this cut had probably occurred before January 2021.13

  • 14 Office for Budget Responsibility, “Economic and fiscal outlook – March 2024”, 6 March 2024, https:/ (...)
  • 15 Daniel Harari, “Productivity: Key Economic Indicators”, Research Briefing, House of Commons Library (...)

6That said, in its latest forecasts accompanying the March 2024 budget, the OBR estimates that potential growth will be around 1⅔ % over the next five years, with growth estimated to have been virtually non-existent in 2023 (0.1 %), and forecast to be a mere 0.8 % in 2024. Growth should then “pick up to around 2 per cent in the middle of the decade as slack in the economy is taken up, before falling back towards its assumed trend rate of around 1⅔ per cent by 2028”.14 Underlying this relatively tepid outlook are Britain’s persistent problems of productivity growth, which go back to the global financial crisis (GFC) of 2007-2008. Prior to the GFC, GDP per hour worked had been rising at 2 % per year. But it has been far more sluggish since then: in the last quarter of 2023 it was only 1.9 % higher than in the last quarter of 2019. The other major industrialised countries have faced a similar weakening of productivity growth, but the latest comparative figures (for 2022) indicate that the UK GDP per hour worked lagged the US and Germany by 16 percent (and France by 10 %).15

7The UK’s recent poor growth is reflected in the stagnation of median income since the Covid pandemic, shown in Table 1, which summarises a number of key data series in the latest HBAI report. The Table includes specific years that I have selected which represent certain turning points in the UK’s growth prospects. The figures begin with financial year (FY) 1994/95, the first year of the HBAI series, but which was towards the beginning of a long boom experienced by the British economy that followed the deep recession of the early 1990s, and which only ended with the GFC. This recession was widespread in the advanced economies of the OECD (Organisation for Economic Cooperation and Development). But the downturn in the UK was compounded by a long period of high interest rates applied by the government of John Major (who succeeded Margaret Thatcher in November 1990) to maintain the pound’s value within the exchange rate mechanism (ERM) of the European Monetary System, which Britain joined in October 1990. This policy broke down spectacularly on 16 September 1992 – “Black Wednesday” – when the pound was ignominiously withdrawn from the ERM. It was a political fiasco from which the reputation of the Major government never recovered. However, it also paved the way for the UK to adopt a new monetary policy regime of inflation targeting and progressively move towards operational independence of the Bank of England, which was finally implemented by the New Labour government of Prime Minister Tony Blair and Chancellor Gordon Brown, in the wake of its election in 1997. Along with a better-managed fiscal policy, the (second) Major government (1992 to 1997) laid the macroeconomic foundations for a long period of growth of nearly fifteen years.

8Notably, the UK experienced only a moderate slowdown in 2000 and 2001, the years respectively of the Dotcom crash and the broader Wall Street crash after the 9/11 attacks. These crashes led to recession in the United States, yet growth in the UK continued, which notably outpaced the performance of its main European partners, leading to talk of a British economic miracle.16 Black Wednesday became “White Wednesday”, most notably in the eyes of Eurosceptics.

Table 1: Summary of Selected Indicators from the DWP’s HBAI Report for 2023

Table 1: Summary of Selected Indicators from the DWP’s HBAI Report for 2023

Key: 1) the median income is expressed in £ per week equivalised (i.e. disposable household income including benefits and after taxes) that has been recalculated to take into account differences in household size and composition. 2) The gap between BHC and AHC in £ and as a percentage share of BHC. 3) The percentage share (%) of the population (all individuals, children and pensioners) living with low income (i.e. 60% of the median income) or less, and the absolute number in millions (nb. (mn)).

* Figures for Great Britain only.

Source: DWP, National statistics, Households Below Average Income: an analysis of the UK income distribution: FYE 1995 to FYE 2023, 21 March 2024, and author’s calculations.

9This sustained growth showed up in the median income figures, which continued to expand until the global financial crisis (2007 to 2008) and the ensuing Great Recession (2008 to 2009), peaking at £587 per week in 2009/10. Median income then fell to £566 per week, in 2011/12, following these shocks, and as the new Conservative-Liberal Democrat coalition government (elected in 2010) applied a policy of austerity to cut the government deficit from 10 % of GDP (to 5 % by the end of the Parliament, in 2015). Despite such austerity, real median income then grew again during the 2010s up until the pandemic: although there was a dip in the BHC (between 2017/18 and 2018/19) and in the AHC figures (between 2016/17 and 2017/18) following the 15 % devaluation of the pound after the June 2016 referendum.

  • 17 Department of Work and Pensions, Report on Child Poverty in the UK, presented to Parliament by the (...)

10The stagnation of growth and incomes in recent years, and especially since the pandemic, is reflected most clearly in the flatlining of the reduction of absolute low income: in other words, rising prosperity as a whole is no longer lifting people out of absolute low income, as it had done in previous decades up until the GFC. While the UK on the whole follows the European practice of measuring low income (or poverty) in relative terms (using the 60% of median income as its key low-income indicator), the New Labour government introduced a measure of absolute income in the early 2000s to help implement its policy of reducing child poverty.17 Unlike in the US, where the “poverty line” is calculated in absolute terms as the cost of a basket of essential goods and services, the UK measure of absolute low income refers to a pound value in a base year, expressed in real terms. This absolute “anchor” value is 60% of the median household income in 2010/11, subsequently adjusted for inflation. Other things being equal, as a society becomes more prosperous, more and more people should be lifted out of this absolute level of low income, and this had been the case for decades: Table 1 clearly shows that the percentage share and total number of people living below the 2010/11 absolute low-income line BHC fell from 37% of all individuals, or 20.3 million people in 1994/95, to 9.9% and 16 million in 2009/10 (continuing the long-run downward trend for which figures have been calculated since the early 1960s). However, there has been only very limited improvement since the global financial crisis: in 2022/23, 9.5% of all individuals, or 14 million people, were still living at or below this absolute low-income level. This is a big setback for British society.

  • 18 The “triple lock” was adopted in 2011 and “is a government commitment to uprate the basic and new S (...)

11Similar trends may be observed for children and pensioners. In 1994/95, 45% of children (5.7 million minors) were living below the absolute low-income line, BHC. With rising prosperity during the long boom (discussed above) and also following measures taken by New Labour to fight child poverty, these figures fell respectively to 19% and 2.5 million in 2009/10. But since then, they have changed little (18% and 2.6 million in 2022/23). The same is true for pensioners. In 1994/95, 54% of pensioners (5.3 million people) were living below the absolute low-income threshold. By 2009/10, these numbers had fallen to 17% and 1.9 million people. Yet recently, they have only continued to improve slightly, falling to 15% and 1.8 million people in 2022/23 – helped by the so-called “triple lock” introduced by the Coalition government to underpin real growth in state pensions.18

12Looking at how levels of relative low income (or poverty) have evolved (i.e. the share of households living at or below 60% of the median income), the situation has been one of little or no change across the board since 2009/10 – both before and after housing costs (BHC and AHC). In line with the poor growth of the median income, the 60% low-income threshold only rose from £352 BHC and £305 AHC per week in 2009/10, to £373 and £327 respectively in 2022/23: levels below the pre-pandemic incomes. Moreover, the shares of persons in relative low income were almost identical across all categories (all individuals, children and pensioners during these two decades), but there were increases in the total number of persons living in low income: up to 11.4 million BHC and 14.3 million AHC in 2022/23 (in part, of course, reflecting population growth). Notable too has been the rise of children living in relative low income, up from 3.9 million individuals in 2009/10 to 4.3 million in 2019/20, and unchanged since.

13The evolution of the UK’s income inequality as indicated by the Gini coefficients – BHC and AHC – has also shown considerable stability in the 21st century (and even going back to the 1990s).19 The Gini coefficient BHC was 35% in 2001/02 (up from 33% in 1994/95), and was at this level in 2022/23, having dipped to 34% during 2020/21 and 2021/22, as the government stepped in to support household incomes during the Covid pandemic, including with a £20 weekly benefits “uplift” for persons on the Universal Credit benefit.20 This stability in the Gini coefficient bears out the observation by François Bourguignon (a leading French specialist on inequality) that Britian experienced a “one-step” rise in inequality with the neoliberal shift by the Thatcher governments in the 1980s, compared with countries like the United States where greater income inequality has resulted more from a persistent trend.21 This however masks how the Top 1% has pulled away from the rest of the population: according to the World Inequality Database, the share of total “fiscal income” (all taxable income before taxes) going to the Top 1% rose from 9.8% in 1990 to 17.3% in 2018.22 As for the difference in the Gini coefficient BHC and AHC, it has been quite stable (at 4%), indicating how housing is persistently a significant factor in UK inequalities, even if the percentage gap the between the level of low income BHC and AHC has fallen over time (see Table 1).

  • 23 Author’s calculations.

14A clear “one-step” increase also occurred during the 1980s in the share of persons living with relative low income (i.e. relative poverty). Using data from the Institute of Fiscal Studies going back to 1961 and the DWP’s HBAI data, the simple average of persons living on low income (at the 60% threshold, AHC) rose from 13.9% in the years 1961 to 1979, to an average of 22.5% in the years 1990 to 2022/23 (these shares also being fairly stable, as annual figures only had a standard deviation of 1% and 1.4% respectively for the two periods).23

  • 24 Stewart Lansley, The Richer, The Poorer: How Britain Enriched the Few and Failed the Poor – A 200-Y (...)

15That the Thatcher years led to such a rise in inequality and poverty is of course widely documented. Similarly, it is hardly surprising that the “austerity” of the Coalition government (2010 to 2015), with significant cuts in welfare benefits and public services in the early 2010s, did not change the situation. What also merits attention, however, is the role of New Labour (in office from 1997-2010) in accepting the post-Thatcher status quo on income distribution. In his wide-ranging history of poverty in the UK, The Richer, The Poorer (2022), poverty-specialist Stewart Lansley examines how New Labour – in contrast to post-World War II Labour – essentially dropped the struggle for reducing social inequalities. Lansley rightly points out that New Labour’s efforts to tackle child poverty in the early years of the 21st century did bring some successes: during these years, the number of children in relative poverty fell by a third, to 17.5% (and pensioner poverty also fell by a quarter, again to 17.5%). But generally speaking, the governments of Tony Blair (1997 to 2007) and Gordon Brown (2007 to 2010) did nothing to seriously change the income redistribution and so “failed to challenge a deeply embedded inequality-poverty relationship”.24

Deep poverty, very deep poverty and destitution

16The stability of disposable income inequality and the share of persons living in low income since the early 1990s lend a certain “normalcy” to the statistics. This, together with the proactive measures of the Johnson government (2019 to 2022) to support households on more modest incomes during the Covid pandemic, masks the quite-widespread existence of extreme poverty in the UK, which may be broken down into “deep poverty”, “very deep poverty” and “destitution” (defined below).

Table 2: Number of people in poverty and poverty rates for different groups, UK, 2021/22

Table 2: Number of people in poverty and poverty rates for different groups, UK, 2021/22

Source: Joseph Rowntree Foundation, UK Poverty 2024: The essential guide to understanding poverty in the UK, based on DWP HBAI 2021/22, January 2024.

17Table 2 was compiled by the Joseph Rowntree Foundation for its report UK Poverty 2024: The essential guide to understanding poverty in the UK, released in January 2024. It goes further into the low-income/poverty statistics presented above, by different categories of population. The figures come from the DWP HBAI report published in 2023, and so are a year older, and based on the smaller (and likely less accurate) survey sample of 2021/22. Apart from children (as mentioned above) they indicate that persons living in households with a single adult have the highest poverty rates: thus 42% of working-age lone parents and 45% of children in lone-parent families were living in poverty in that year.

18The Joseph Rowntree Foundation (JRF) also looks at what it calls “deep poverty” and “very deep poverty”, the former being defined as individuals with an equivalised household income after housing costs which is less than 50% of the UK median household income, and the latter having less than 40% of the median income. According to these definitions, around 9.7 million people in 2021/22 lived in “deep poverty”, and within this number 6.0 million lived in “very deep poverty”, equivalent to about four in ten of the people living in poverty (41%). Moreover, this is a number that had grown by “one and a half million” in the preceding 20 years.

Table 3: Persistent poverty and very deep poverty rates for different groups, UK, 2017–18 to 2021–22

Table 3: Persistent poverty and very deep poverty rates for different groups, UK, 2017–18 to 2021–22

Source: Ibid.

  • 25 Joseph Rowntree Foundation, UK Poverty 2024: The essential guide to understanding poverty in the UK(...)

19Fortunately, it does seem that the “persistence” of living in “very deep poverty” is significantly lower than for poverty as a whole: “persistence” being defined by the DWP as having an income that is less than 60% (poverty) and 40% (“very deep poverty”) of the median in at “least three years out of four”. According to the 2024 JRF report, the data shows that, “between 2017/18 and 2020/21, 12% of people across the UK lived in persistent poverty. The persistent poverty rate was higher for children (19%) than for pensioners (10%) and working-age adults (11%)”. Table 3, however, shows that the persistence rates for very deep poverty are “are much lower than the persistent poverty rate”.25

  • 26 Suzanne Fitzpatrick, Glen Bramley, Morag Treanor, Janice Blenkinsopp, Jill McIntyre, Sarah Johnsen, (...)

20Turning to the issue of “destitution”, research by Suzanne Fitzpatrick et al. and also published by the Joseph Rowntree Foundation in late 2023 describes the horrific conditions of nearly four million people living in the UK today.26 Destitution is defined here as "the most severe form of material hardship", measured in two ways:

211. Lack of access to at least two of six items needed to meet the most basic physical needs to stay warm, dry, clean and fed, specifically defined as: i) shelter (persons have slept rough for one or more nights); ii) food (they have had fewer than two meals a day for two or more days); iii) heating (have been unable to heat their home for five or more days); iv) lighting (unable to light their home for five or more days); v) clothing and footwear (appropriate for weather); and vi) basic toiletries (such as soap, shampoo, toothpaste and a toothbrush).

  • 27 Ibid., pp. 10-11.

222. Extremely low or no income, indicating that persons cannot afford the items described above. When calculated as a weekly income this is £95 for a single adult living alone, £125 for a lone parent with one child, £145 for a couple with no children and £205 for a couple with two children.27

Table 4: National estimates of destitution in the UK, 2022

Table 4: National estimates of destitution in the UK, 2022

Source: Suzanne Fitzpatrick, Glen Bramley, Morag Treanor, Janice Blenkinsopp, Jill McIntyre, Sarah Johnsen, Lynne McMordie, Destitution in the UK 2023, Joseph Rowntree Foundation, Herriot Watt University and I-Sphere, 2023, p 15, based on the 2022 destitution survey.

  • 28 Ibid., pp. 15-16.

23The report notes that destitution “is no longer a rare occurrence in the UK”, and affected “around 1.8 million households… at some point over the course of 2022”. These households contained approximately 3.8 million people, of whom around one million were children. Table 4 provides a broad breakdown of this overall figure, indicating moreover that one in ten persons in destitution also face “complex needs” (i.e. “experiencing two or more of homelessness, drug and/or alcohol problems, offending, domestic violence or begging): conversely “a clear majority of people affected by destitution (59%) are UK nationals without complex needs”.28

24Strikingly, destitution rates seem to have accelerated at the end of the 2010s and into the 2020s: perhaps because income support by the government during the pandemic was largely brought to an end in September 2021 – at a time when inflation in the UK (and elsewhere) was rising rapidly, leading to a significant squeeze on incomes generally. Fitzpatrick et al. observe that “the number of destitute households increased by 64% between 2019 and 2022”, with 61% more persons living in the households being affected: notably “[t]he number of children living in these households almost doubled (88%)”. The respective figures for increases between 2017 and 2022 were 122% (the overall number of households), 148% (the number of people living in destitute households) and 186% (the number of children in such households). This suggests there was an acceleration in destitution over the whole period (2017 to 2022).

  • 29 Ibid., p.71.

25Concerning particular groups, destitution was three times more prevalent among black-led households compared to their population share. Migrants (i.e. people born overseas) also account(ed) for nearly a quarter (23%) of all households experiencing destitution. There is also a strong connection between destitution and health, with nearly two-thirds (62%) of the persons surveyed reporting that they had a chronic health problem or suffered from disability. Single people are also the most at risk, making up “three-fifths” of the destitute, with lone-parent households also being especially affected. Geographically speaking, London had the “highest destitution levels in 2022, followed by the North East and North West”. By contrast, rates were lowest in southern English regions.29

Graph 1: Essentials lacked in the preceding month by destitute households, 2022 and 2019

Graph 1: Essentials lacked in the preceding month by destitute households, 2022 and 2019

Source: Ibid., page 19, based on the 2019 and 2022 destitution surveys.

26How destitution manifests itself across the lack of access to the six basic items mentioned above is shown in Graph 1. Lack of food was mentioned first and foremost among these items, affecting 61% of all households in destitution in 2022 (recall that the lack of two items constitutes one of the definitions of destitution, the other being very low income). The graph also shows how the lack of heating and even lighting surged between 2019 and 2022 – reflecting the rise in energy costs experienced in the UK (as elsewhere).

27A further indicator corroborating the recent rise of “very deep poverty” and “destitution” – despite the overall stability of Britain’s income inequality and low-income statistics – is the increase in food bank parcels distributed by the Trussel Trust network (of 1,646 locations across the UK), although its network “is just one part of the picture of need across the UK”, there being a “wide range” of other emergency food providers. Graph 2 shows how the number of parcels provided to adults and children more than doubled between FY2017/18 and FY 2022/23.

Graph 2: Parcels provided for adults, children, and total in the UK FY2017/18 - 2022/23

Graph 2: Parcels provided for adults, children, and total in the UK FY2017/18 - 2022/23

Source: The Trussell Trust, Emergency food parcel distribution in the UK: April 2022 – March 2023.

The problems of housing and wellbeing

28The calculation of inequality and poverty statistics before and after housing costs (respectively BHC and AHC) is specific to the UK, and does not figure, for example, in comparative data by the OECD.30 As with other issues related to inequality and low income in the UK, the question of housing costs gained importance during the 1980s: for example, the gap in the Gini coefficient of equivalised disposable income between BHC and AHC rose in a succession of steps: in the years 1961 to 1979, it averaged 0.8%; rising to 2% on average for 1980 to 1991; then to 3.7% on average in the years 1992 to FY2004/05; and to 4.5% for the years 2005/06 to 2022/23. A peak of 5.0% was reached in 2016/17, but since then the gap has fallen back to 4.0% in 2022/23.31

29Put another way, as a Jonathan Cribb et al. from the Institute of Fiscal Studies noted at the end of 2023,

  • 32 Jonathan Cribb, Thomas Wernham, Thomas, and Xiaowei Xu, “Housing costs and income inequality in the (...)

[p]oorer households spend more of their income on housing than do richer households, and this difference has increased over time. In 1968, housing costs constituted 9.% of average disposable incomes for households in the poorest quarter of the population; this rose to 26% in 2015 before falling to 21% in 2021.32

  • 33 Ibid., p.1.

30Yet housing benefits also cushion costs, as benefits rise with housing costs for poorer people, so that in 2016, the poorest households spent “only” 19% of their income on housing. By contrast, “for the richest quarter of the population, housing costs constituted just 4% of average income in 1968 and 6% in 2021”.33

31The causes of rising housing costs are however quite complex. They may partly reflect individual preferences, and so do not really call for government intervention. However, housing costs may vary largely, independently of occupiers’ choices, resulting from, and justifying public policy. Factors to be taken into consideration include, for example, government policy on rents, especially in the social sector. In the UK, social housing is provided by local authorities or “housing associations”, and rents are typically set below market rates. Alternatively, owner-occupiers servicing variable-rate mortgages (still standard in the UK), experienced falling housing costs in the wake of the GFC as interest rates came down markedly and then only really began to pick up – quite strongly – as inflation surged from mid-2021 onwards.

32This leaves the private rental sector as one segment of the housing market where renters have clearly faced higher housing costs in recent times. According to Cara Pacitti of the Resolution Foundation, “rental prices for new tenancies have risen by nearly a fifth since the beginning of 2022”. This is now the “UK’s least affordable tenure type” while nearly “30 per cent of below-average-income families headed by someone aged 30-49 were renters in 2021-22, up from just 11 per cent in the mid-1990s”. Yet Pacitti provides another example of the new “normalcy” by noting that the present rise in rents has more to do with incomes than insufficient supply, noting that the

  • 34 Cara Pacitti, “Through the roof; Recent trends in rental-price growth”, Resolution Foundation Brief (...)

UK may well not have enough properties, but the number of homes per 1,000 families in England stood at 780 by 2022, essentially the same as it was at the turn of the millennium (and actually an improvement on housing availability a decade ago).34

Table 5: Annual average per decade of permanent dwellings completed by sector in the UK

Table 5: Annual average per decade of permanent dwellings completed by sector in the UK

Source: Author’s calculations (2022) based on ONS, House building, UK permanent dwellings started and completed by country. https://www.ons.gov.uk/​peoplepopulationandcommunity/​housing/​datasets/​ukhousebuildingpermanentdwellingsstartedandcompleted.

  • 35 David Fée, “Politique du logement et bien-être en Angleterre : perspective historique et réflexions (...)
  • 36 Department of the Environment, Transport and the Regions, Home Ownership Incentive Schemes, Housing (...)
  • 37 Department of the Environment, Our Future Homes Opportunity, Choice, Responsibility, Cmnd 2901, (Lo (...)
  • 38 Office for National Statistics (ONS), United Kingdom population mid-year estimate, 26 March 2024, h (...)

33However, looking only at trends in the 21st century masks the historical changes in the housing sector since the shift to neo-liberalism under the Thatcher governments of the 1980s. This is not the place to review the history of housing policy since the late 1970s (for an excellent historical overview on housing and wellbeing see Fée, 2019 35). Nevertheless, a couple of salient points can be made about fundamental changes in the state of housing in the UK, going back to the Thatcher years, which led to a marked retrenchment in social housing and home building. Keen to weaken the role of local authorities, to cut headline public deficits and to strengthen homeownership, the Conservatives embarked on their largest privatisation project ever on entering office, by introducing Right-to-Buy legislation in 1980. This allowed sitting-tenants to buy their council homes at a discount to the market price. Taken on its own, the policy did have the advantage of meeting the aspirations of many, and between 1980 and early 1998, 1.8 million homes were sold, for a value of £20 billion.36 This contributed to the rise in Britain’s homeownership rate from 56% in 1979 to 68% in 1995.37 However, the policy was accompanied by a substantial retrenchment in the building of social housing, and more generally a notable fall in the construction of new homes. Indeed, Table 5 reveals a marked decline in the construction of completed dwellings over the last decades… even though the UK’s population has expanded from 56.3 million in 1980 to 67.6 million in 2022.38

Graph 3: House-price earnings multiples (males)

Graph 3: House-price earnings multiples (males)

Source: Lamont, Duncan, “What 175 years of data tell us about house price affordability in the UK, Perspective, Schroders, 20 February 2023. https://www.schroders.com/​en-gb/​uk/​individual/​insights/​what-174-years-of-data-tell-us-about-house-price-affordability-in-the-uk/​. Accessed 9 April 2024.

34Such lower construction rates over the decades have their role to play in the rising cost of housing relative to incomes, as has financial deregulation and the long-term fall in real interest rates between the mid-1980s and the late 2010s. Graph 3, compiled by Duncan Lamont of the investment bank Schroders, shows how house-price-earnings multiples have evolved since 1969 – for men, with the situation being even worse for women. The result is that house prices are today on average 12 times the value of average earnings in London, and more than 10 times in South East England.

  • 39 Wendy Wilson, Hannah Cromarty, Antony Seely, and Cassie Barton, “Extending home ownership: Governme (...)

35Not surprisingly, the rise in the price-earnings multiple is having an effect on homeownership, which has been declining since its peak of 73% in 2003 (in England), falling back to 65% in 2019/20. This decline has been especially important for younger age groups: in 2003/04, 59% of households led by a person aged 25-34 were homeowners, a figure that fell to 41% in 2019/20. For households headed by someone aged 35-44, the decline was even steeper, with the homeownership rate falling from 74% to 56%, during the period.39

  • 40 John Burn-Murdoch, “Home ownership in Britain has become a hereditary privilege”, The Financial Tim (...)
  • 41 Ibid.

36The rise in the price-earnings multiples of homes also means that homeownership in the UK has increasingly become a “hereditary privilege” and an essential component of wealth inequalities. According to John Burn-Murdoch of The Financial Times, “[f]orty years ago it took the average couple three years to save for a deposit to buy a home in the UK. Today it takes nine, rising to 15 in London”.40 As a result, young adults are increasingly reliant on parents helping them: surveys (by YouGov) suggest that in 1980, 1% of first-time owners had their homes gifted or paid for by parents, 10% had received help with their deposits and a further 8% had received other financial assistance. By 2020, these figures had risen respectively to 5% (gifted or paid), 30.4% (help with a deposit) and 19% (other financial support). As a result, “home ownership and housing are the biggest drivers of the wealth divide within each generation… making affluence among one generation increasingly conditional on parental wealth”.41

  • 42 The survey and the figure are quoted by Wilson et al.

37A large majority of people would prefer to buy their own home rather than rent. According to a British Social Attitudes Survey in 2014, this was the case for 86% of people given a free choice.42 The decline in homeownership rates is thus surely reducing people’s life possibilities and hence their wellbeing, be it in terms of happiness or of “life satisfaction” as mentioned by Deaton.

38Of more serious and direct consequences on wellbeing is the fact that housing has a clear impact on health. In 2020, for example, the Institute of Health Equity published a report stating emphatically that:

  • 43 Michael Marmot, Jessica Allen, Tammy Boyce, Peter Goldblatt, Joana Morrison, “Health Equity in Engl (...)

Poor-quality housing harms health and evidence shows that exposure to poor housing conditions (including damp, cold, mould, noise) is strongly associated with poor health, both physical and mental. […] Specific physical effects are morbidity including respiratory conditions, cardiovascular disease and communicable disease transmission, and increased mortality. In terms of mental health impacts, living in non-decent […] has been associated with increased stress and a reduction in a sense of empowerment and control over one’s life and with depression and anxiety.43

  • 44 Ibid.

39The 2020 report notes that “[o]verall housing conditions [had] improved over the last decade, but there [was] still a large proportion of homes in England that [were] in poor condition”. Moreover, these were “still most commonly found in the private rented sector, and in 2017/18 around 1.9 million private renters reported an issue with condensation, damp or mould in their home”.44

  • 45 Anthony Giddens, Modernity and Self-Identity: Self and Society in the Late Modern Age (Cambridge, P (...)
  • 46 See for example, Stefanie Plage et al., “Longing for a Forever Home: Ontological insecurity is coll (...)

40It may also be noted that declining homeownership, less social housing and the rising role of the private rented sector also impact on people’s sense of security – an essential aspect of wellbeing. There is an increasing body of literature on how homeownership underpins individuals’ “ontological security”, a concept originally developed by the psychiatrist R.D. Laing but brought into sociology by Anthony Giddens to refer to the “sense of continuity and order in events” which allow individuals to develop trust and pursue meaning in their lives, rather than live in anxiety.45 The role of having a stable home, notably when associated with homeownership, is highly important to people’s security and their ability to fulfilling lives – in short to their wellbeing.46 Given trends in the UK housing market since the 1980s, this component of wellbeing is clearly becoming more elusive for younger generations.

Conclusion

41This article has reviewed a number of key income issues that directly impact on the wellbeing of individuals living in households with low income – in other words people living in poverty. The approach has mainly been to examine economic welfare, which in the case of low-income households, to say nothing of persons living in “very deep poverty” or “destitution” (both defined above), prevents them from meeting their fundamental physiological needs as set out by Maslow, say, most notably in terms of not having enough food and heating. The article also touches on the way changes in housing in the UK since the Thatcher years (including declining construction, a diminished social rental sector, and the greater difficulties for many younger and even middle-aged households to access homeownership) are impacting wellbeing via problems of health and insecurity.

42A key observation is that stagnating growth in the UK since the global financial crisis means that the long-term fall in absolute poverty in the UK, which available figures show had declined in the preceding decades has greatly slowed down. As a result, over 14 million people today (FY 2022/23) are still living with a real income (after housing costs) which defined low-income/poverty in 2010/11. Also, research by the Joseph Rowntree Foundation indicates that nearly 4 million people lived in “destitution” in 2022 (including one million children) – a significant rise from before the pandemic.

  • 47 Ibid, OBR, 6 March 2024.

43Looking ahead, the prospects for significant improvements are limited. In the immediate future, forecasts published by the Office for Budget Responsibility which accompanied the Budget of March 2024 suggest that the squeeze on real incomes in recent years (following the Covid pandemic as well as the rise of inflation, and especially higher energy costs) will recede, so that real household disposable income per person is forecast to recover its pre-pandemic peak by 2025/26, notably as the rise in imported energy prices unwinds.47 More support for low-incomes by a Labour government after the 2024 elections would likely reduce relative and absolute poverty at the margins. However, as Stewart Lansley has pointed out, drawing on New Labour’s period in office (1997 to 2010), minor gains in bringing down poverty through more active government policies – even when quite strongly targeted on children – tend to be marginal and will fail over time, in the absence of profounder social and economic policies to address inequality and the share of national income going to wages.

Nicholas Sowels is a Senior Lecturer in English for economics. His classes include courses on financial services policies in the United States and United Kingdom (UK), as well as on political economy. His research concerns public (economic) policy, Brexit, Brexit and finance as well as inequalities in the UK.

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Notes

1 My thanks go to the reviewer of this article and Stewart Lansley who both suggested very useful improvements. All remaining errors and omissions are of course mine.

2 Mark Suzman, “The Roots of the Global South’s New Resentment: How Rich Countries’ Selfish Pandemic Responses Stoked Distrust”, Foreign Affairs, 8 September 2023.

3 Carolina Sánchez-Páramo, “COVID-19 leaves a legacy of rising poverty and widening inequality”, World Bank Blogs, 7 October 2021, https://blogs.worldbank.org/en/developmenttalk/covid-19-leaves-legacy-rising-poverty-and-widening-inequality Accessed 11 April 2024.

4 Louise Dalingwater, Iside Costantini and Nathalie Champroux, “Wellbeing : Political Discourse and Policy in the Anglosphere. Introduction”, Revue Interventions économiques 62 (2019), https://journals.openedition.org/interventionseconomiques/pdf/6492

5 Angus Deaton received the Nobel prize for economics in 2015 “for his analysis of consumption, poverty and welfare”. https://www.nobelprize.org/prizes/economic-sciences/2015/summary/ Accessed 30 March 2024.

6 Angus Deaton, The Great Escape: Health, Wealth, and the Origins of Inequality (Princeton and Oxford, Princeton University Press, 2015), p 24.

7 Ibid., p 17.

8 Ibid., p 49.

9 Ibid., p 53, and Daniel Kahneman and Angus Deaton, “High income improves evaluation of life but not emotional wellbeing”, PNAS 107 (38) (21 September 2010), pp. 16489-16493.

10 Abraham Maslow “A Theory of Human Motivation”, Psychological Review 50 (1943), pp. 370-396.

11 Stewart Lansley, The Richer, The Poorer: How Britain Enriched the Few and Failed the Poor – A 200-Year History (Bristol: Polity Press, 2022), pp. 130-2.

12 Data collection was better for the 2023 survey as it was largely based on face-to-face interviews with 25 thousand households, up from around 20 thousand households before the pandemic, and much higher than during the pandemic when households were surveyed by telephone. The latest figures should therefore be more reliable. See the introductory Box of DWP, National statistics, Households Below Average Income: an analysis of the UK income distribution: FYE 1995 to FYE 2023, 21 March 2024, https://www.gov.uk/government/statistics/households-below-average-income-for-financial-years-ending-1995-to-2023 Accessed 25 March 2024.

13 Office for Budget Responsibility, Brexit Analysis, latest update 17 April 2023, https://obr.uk/forecasts-in-depth/the-economy-forecast/brexit-analysis/ Accessed 5 April 2024.

14 Office for Budget Responsibility, “Economic and fiscal outlook – March 2024”, 6 March 2024, https://obr.uk/efo/economic-and-fiscal-outlook-march-2024/ Accessed 6 April 2024, para. 1.9.

15 Daniel Harari, “Productivity: Key Economic Indicators”, Research Briefing, House of Commons Library, 16 February 2024, https://commonslibrary.parliament.uk/research-briefings/sn02791/ 6 April 2024.

16 See for example, The Economist, “A British miracle?”, 23 March 2000, https://www.economist.com/britain/2000/03/23/a-british-miracle Accessed 11 April 2024.

17 Department of Work and Pensions, Report on Child Poverty in the UK, presented to Parliament by the Secretary of State for Work and Pensions, Cm 6200, June 2004.

18 The “triple lock” was adopted in 2011 and “is a government commitment to uprate the basic and new State Pension every year by the highest of earnings growth, inflation, or 2.5%”. Hobson, Francis, Harker, Rachael and Kird-Wade, Esme, "State Pension triple lock", Research Briefing, House of Commons Library, 6 November, 2023, https://commonslibrary.parliament.uk/research-briefings/cbp-7812/ accessed 7 April 2024.

19 The Gini coefficient is a widely used statistical calculation to measure distribution in a population. It is often (but not exclusively) used as a key indicator of income inequality, with a value of 0 (or 0%) indicating a perfectly equal distribution, and a value of 1 (or 100%) indicating a perfectly unequal distribution. In practice, there tends to be an upper limited of 0.7 (or 70%) to the Gini coefficient for income as all members of a society need at least some bare minimum income to survive. In 2021, the Gini coefficient for household disposable income among member states ranged from of 0.217 (or 21.7%) in the Slovak Republic, 0.472 (or 47.2%) for Costa Rica (OECD, Income inequality. https://data.oecd.org/inequality/income-inequality.htm Accessed 12 June 2024.

20 Nicholas Sowels “The Impact of the Covid-19 Pandemic on Incomes, Inequality and Poverty in the United Kingdom”, in Louise Dalingwater and Philippe Brillet, La pandémie de Covid-19 au Royaume-Uni, Revue française de civilisation britannique 28(2) 2023, https://journals.openedition.org/rfcb/10771 accessed 7 April 2024.

21 François Bourguignon, “World changes in inequality: an overview of facts, causes, consequences and policies”, Monetary and Economic Department. BIS Working Papers 654 (August 2017).

22 World Inequality Database, “Top 1% fiscal income share, United Kingdom, 1990-2018”, 2022. https://wid.world/country/united-kingdom/ Accessed 13 May 2024.

23 Author’s calculations.

24 Stewart Lansley, The Richer, The Poorer: How Britain Enriched the Few and Failed the Poor – A 200-Year History (Bristol: Polity Press, 2022), p.71.

25 Joseph Rowntree Foundation, UK Poverty 2024: The essential guide to understanding poverty in the UK, based on DWP HBAI 2021/22, January 2024.

26 Suzanne Fitzpatrick, Glen Bramley, Morag Treanor, Janice Blenkinsopp, Jill McIntyre, Sarah Johnsen, Lynne McMordie, Destitution in the UK 2023, Joseph Rowntree Foundation, Herriot Watt University and I-Sphere, 2023.

27 Ibid., pp. 10-11.

28 Ibid., pp. 15-16.

29 Ibid., p.71.

30 Jonathan Cribb, Thomas Wernham, Thomas, and Xiaowei Xu, “Housing costs and income inequality in the UK”, IFS Deaton Review of Inequalities, [November] 2023.

31 Author’s calculations from IFS data (https://ifs.org.uk/living-standards-poverty-and-inequality-uk accessed 9 April 2024) and DWP HBAI 2024.

32 Jonathan Cribb, Thomas Wernham, Thomas, and Xiaowei Xu, “Housing costs and income inequality in the UK”, IFS Deaton Review of Inequalities, [November] 2023, p.1., https://ifs.org.uk/sites/default/files/2024-01/IFS-Report-Housing-costs-and-income-inequality-in-the-UK-edited.pdf

33 Ibid., p.1.

34 Cara Pacitti, “Through the roof; Recent trends in rental-price growth”, Resolution Foundation Briefing, April 2024, p.3, https://www.resolutionfoundation.org/app/uploads/2024/04/Through-the-roof.pdf, accessed 3 July 2024.

35 David Fée, “Politique du logement et bien-être en Angleterre : perspective historique et réflexions sur la situation contemporaine”, in Louise Dalingwater, Iside Constantini and Nathalie Champroux, Wellbeing: Political Discourse in the Anglosphere, Revue Interventions économiques 62 (2019), https://journals.openedition.org/interventionseconomiques/6225

36 Department of the Environment, Transport and the Regions, Home Ownership Incentive Schemes, Housing, Factsheet No. 2, July 2000.

37 Department of the Environment, Our Future Homes Opportunity, Choice, Responsibility, Cmnd 2901, (London, HMSO, TSO, 1995).

38 Office for National Statistics (ONS), United Kingdom population mid-year estimate, 26 March 2024, https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/timeseries/ukpop/pop accessed 9 April 2024.

39 Wendy Wilson, Hannah Cromarty, Antony Seely, and Cassie Barton, “Extending home ownership: Government initiatives”, Research Briefing, House of Commons, 30 March 2021. https://commonslibrary.parliament.uk/research-briefings/sn03668/ Accessed 9 April.

40 John Burn-Murdoch, “Home ownership in Britain has become a hereditary privilege”, The Financial Times, 23 July, 2023, https://www.ft.com/content/985a608e-17a3-42ff-abb1-d78a10627a12

41 Ibid.

42 The survey and the figure are quoted by Wilson et al.

43 Michael Marmot, Jessica Allen, Tammy Boyce, Peter Goldblatt, Joana Morrison, “Health Equity in England: The Marmot Review 10 Years on”, Institute of Health Equity, 2020, p.108, https://www.instituteofhealthequity.org/resources-reports/marmot-review-10-years-on/the-marmot-review-10-years-on-full-report.pdf, accessed 3 July 2024.

44 Ibid.

45 Anthony Giddens, Modernity and Self-Identity: Self and Society in the Late Modern Age (Cambridge, Polity Press, 1991), pp. 35-69.

46 See for example, Stefanie Plage et al., “Longing for a Forever Home: Ontological insecurity is collectively produced in fixed-term supportive housing for families”, Housing, Theory and Society 40 (2) (2023), pp.394-410.

47 Ibid, OBR, 6 March 2024.

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Table des illustrations

Titre Table 1: Summary of Selected Indicators from the DWP’s HBAI Report for 2023
Légende Key: 1) the median income is expressed in £ per week equivalised (i.e. disposable household income including benefits and after taxes) that has been recalculated to take into account differences in household size and composition. 2) The gap between BHC and AHC in £ and as a percentage share of BHC. 3) The percentage share (%) of the population (all individuals, children and pensioners) living with low income (i.e. 60% of the median income) or less, and the absolute number in millions (nb. (mn)).
URL http://journals.openedition.org/osb/docannexe/image/6607/img-1.jpg
Fichier image/jpeg, 578k
Titre Table 2: Number of people in poverty and poverty rates for different groups, UK, 2021/22
Crédits Source: Joseph Rowntree Foundation, UK Poverty 2024: The essential guide to understanding poverty in the UK, based on DWP HBAI 2021/22, January 2024.
URL http://journals.openedition.org/osb/docannexe/image/6607/img-2.png
Fichier image/png, 111k
Titre Table 3: Persistent poverty and very deep poverty rates for different groups, UK, 2017–18 to 2021–22
Crédits Source: Ibid.
URL http://journals.openedition.org/osb/docannexe/image/6607/img-3.png
Fichier image/png, 161k
Titre Table 4: National estimates of destitution in the UK, 2022
Crédits Source: Suzanne Fitzpatrick, Glen Bramley, Morag Treanor, Janice Blenkinsopp, Jill McIntyre, Sarah Johnsen, Lynne McMordie, Destitution in the UK 2023, Joseph Rowntree Foundation, Herriot Watt University and I-Sphere, 2023, p 15, based on the 2022 destitution survey.
URL http://journals.openedition.org/osb/docannexe/image/6607/img-4.png
Fichier image/png, 19k
Titre Graph 1: Essentials lacked in the preceding month by destitute households, 2022 and 2019
Crédits Source: Ibid., page 19, based on the 2019 and 2022 destitution surveys.
URL http://journals.openedition.org/osb/docannexe/image/6607/img-5.png
Fichier image/png, 14k
Titre Graph 2: Parcels provided for adults, children, and total in the UK FY2017/18 - 2022/23
Crédits Source: The Trussell Trust, Emergency food parcel distribution in the UK: April 2022 – March 2023.
URL http://journals.openedition.org/osb/docannexe/image/6607/img-6.png
Fichier image/png, 32k
Titre Table 5: Annual average per decade of permanent dwellings completed by sector in the UK
Crédits Source: Author’s calculations (2022) based on ONS, House building, UK permanent dwellings started and completed by country. https://www.ons.gov.uk/​peoplepopulationandcommunity/​housing/​datasets/​ukhousebuildingpermanentdwellingsstartedandcompleted.
URL http://journals.openedition.org/osb/docannexe/image/6607/img-7.png
Fichier image/png, 8,2k
Titre Graph 3: House-price earnings multiples (males)
Crédits Source: Lamont, Duncan, “What 175 years of data tell us about house price affordability in the UK, Perspective, Schroders, 20 February 2023. https://www.schroders.com/​en-gb/​uk/​individual/​insights/​what-174-years-of-data-tell-us-about-house-price-affordability-in-the-uk/​. Accessed 9 April 2024.
URL http://journals.openedition.org/osb/docannexe/image/6607/img-8.png
Fichier image/png, 138k
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Nicholas Sowels, « The Hard Material Challenges of Extreme Poverty, Destitution and Housing to Wellbeing in the United Kingdom »Observatoire de la société britannique [En ligne], 32 | 2024, mis en ligne le 31 décembre 2024, consulté le 17 mars 2025. URL : http://journals.openedition.org/osb/6607 ; DOI : https://doi.org/10.4000/13byz

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Nicholas Sowels

Université Paris 1 Panthéon-Sorbonne, PHARE (CREW associate)

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