Falling incomes will mean the biggest drop for middle-income families since the 1970s, says a report from the Institute for Fiscal Studies.
The IFS forecasts two years “dominated by a large decline” in incomes, pushing 600,000 more children into poverty,
By 2013 there will be 3.1 million children in poverty in the UK, according to the IFS projections.
A Department for Work and Pensions spokesman said benefits changes would tackle poverty by “making work pay”.
People are considered to be below the poverty line, or living in relative poverty, if they have a household income which is below 60% of the median national income.
The report from the IFS independent financial research organisation said 2.2 million children and two million working age adults were living in absolute poverty – which it classifies as a household income less than 60% of the 2010-11 median – in 2009-10.
In percentage terms, 17% of UK children were living in absolute poverty in 2009-10.
It warns that in the next two years there will be deepening levels of adult and child poverty.
By 2012-13, the IFS predicts this will rise to 21.8% as an extra 600,000 children and 800,000 adults of working age will be in absolute poverty.
The report also issues a stark warning of tough times for people in the so-called “squeezed middle” – with median incomes falling by 7%, after inflation has been taken into account, the sharpest drop in 35 years.
There will also be 2.5m working-age parents and four million working-age adults without children in absolute poverty by 2013, says the report.
It also confirms previous suggestions that targets set in 2010 to cut absolute child poverty by 2020 to 5% are likely to be missed by a wide margin – with the IFS forecasting it will be 23%.
Sally Copley of Save the Children explains how child poverty is defined
The IFS said median income was also forecast to begin slowly rising after 2013 – although it is not projected to have recovered its losses by 2015.
The government wants a system where people are better off in work than they would be on benefits.
It has proposed the Universal Credit which is designed to replace six income-related, work-based benefits.
The IFS says this should directly reduce the number of children in poverty by 450,000, and adults in poverty by 600,000, by 2020-21.
However by 2020, the IFS is projecting there will be 4.7m working-age adults without children in absolute poverty.
Report co-author James Browne warned that the targets adopted on cutting child poverty by 2020 could not be achieved with the current trends.
He said the previous government had cut child poverty by nearly a quarter between 1998 and 2009 after it increased spending on benefits and tax credits however this was not enough for the government to hit its child poverty targets.
Mr Browne added that even if there were an immense increase in the resources made available, it was hard to see how the legally binding targets to reduce child poverty could be achieved in nine years.
WHAT IS THE POVERTY LINE?
- Single adult, no children: £165 per week.
- Couple, no children: £248 per week.
- Lone parent, 1 child: £215 per week.
- Lone parent, 2 children: £264 per week.
- Lone parent, 3 children: £314 per week.
- Couple, 1 child: £297 per week.
- Couple, 2 children: £347 per week.
- Couple, 3 children: £396 per week.
- Source: IFS, based on 2011
Speaking on BBC Radio 4’s Today programme, Universities Minister David Willetts said: “The country is not as well off as we thought.
“There are things we can do. We’ve tried to hold down fuel duty, freezing council tax, have increased the income tax allowance.
“We’re tried to do the things that help but you can’t ignore the basic rules of economics that when you inherent a situation where the economy has shrunk by 7% there isn’t the money there.”
Responding to the IFS forecast, Barnardo’s chief executive Anne Marie Carrie said: “The projected figures for child poverty revealed today are a tragedy.
“This isn’t just about statistics as every day thousands of families are being forced into making choices between heating or eating.”
Alison Garnham, Chief Executive of Child Poverty Action Group, said: “Ministers seem to be in denial that, under current policies, their legacy threatens to be the worst poverty record of any government for a generation.
“They risk damaging childhoods and children’s life chances, as well as our national economic wellbeing from wasted potential and social costs spiral. It would be a catastrophic failure in public policy and political leadership.”
A spokesman for the Department for Work and Pensions argued that the Universal Credit would bring more families into work – and that it would break the cycle of poverty.
“The IFS acknowledge that Universal Credit will substantially reduce child poverty.
“It will make work pay for the first time, tackling in-work poverty and lift over one million people, including 450,000 children, out of poverty.
“Our wide-ranging reforms will have a dynamic impact on some of the poorest families, encouraging people into work, many for the first time, and improving the life chances of children at an early age.
“Over the last decade billions of pounds have been moved around the tax and benefit system in an attempt to address poverty. This has had the perverse effect of trapping thousands of families on benefits while income inequality increased to its highest ever level.
“It is clear that sticking with the status quo, which has had no meaningful long-term effect on poverty projections, is not an option.”
The IFS report was funded by the Joseph Rowntree Foundation.
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