Difficult promises on poverty for the coalition

“We’re all in this together” is the Coalition’s favourite catchphrase. And it doesn’t seem like that from Pennethorne House, Wandsworth. A tough neighbourhood in a deprived ward in an otherwise wealthy London borough is bracing itself for chill winds that are more than just about temperature.

The austerity benefit and spending cuts will create poverty according to the first independent audit of how poverty will be impacted in the coming years. The Joseph Rowntree Trust and Institute for Fiscal Studies tonight issue an analysis forecasting a surge in one measure of poverty of just under a million within three and a half years time.

As Robert Joyce of the IFS told me: “We think that overall, taking all children of working age individuals together – relative poverty and absolute poverty will both rise by just under a million over the next three years, much of that happens in 2013/14. Much of it is driven by welfare cuts that are part of the current government’s deficit reduction strategy. Also a contributing factor is that the OBR is forecasting that earnings in real terms will fall in the future,” he said.

So this number does not include pensioners. The Treasury did a welcome analysis of this type after the Budget and Spending Review. But the analysis stopped in two years time, before key welfare cuts kicked in, and it also did not include some housing benefit cuts. The Treasury’s conclusion was that child poverty did not rise as a result of their measures, and the Chancellor included this fact in both his speeches. The IFS/ JRF study disputes this, slightly. child poverty will be 100,000 higher in 2012, as a result of those unmodelled housing benefit changes.

What do these definitions of poverty actually mean? Well this year the poverty line for a family with two children is £344 per week, 60 per cent of the average income. Reasonable people can disagree about this.

Policy Exchange director Neil O’Brien said: “The problem with what the IFS is saying is that the measure they use isn’t an indicator of real poverty; it’s a measure of inequality. It defines ‘poverty’ as being below 60 percent of the average income. This is a hangover from the Gordon Brown era.

“Real poverty isn’t the same as inequality. The IFS’s definition would mean that there are actually more people in poverty in Britain today than there are in Poland.”

Yet the Coalition Treasury itself has used the Gordon Brown definition of child poverty, specifically when it claimed child poverty would not go up as a result of its “Budget and Spending Review”. That the measures would not increase child poverty on the relative measure in the next two years. This report disputes that, saying that because of changes to housing benefit not included in Treasury calculations, even child poverty will rise a little in 2012.

The strongest defence the Government has here is that this report does not include the impact of the Universal Credit, which may reverse some of these poverty increases.

So far, however, this report is the fullest account of what will happen to poverty, on what is, still, the official definition.