That average incomes are set to continue to fall until ‘at least 2013-14’ is bad enough. But scratch beneath the surface, as the IFS do, and it’s clear that the poorest face the heaviest burden. Essentially, the poorer you are, the higher the proportion of your income that you will lose over the coming years. (With the exception of the super-rich, largely due to the under-threat 50p rate of tax for earnings over £150,000 a year.) Inequality and poverty will rise as a result – reversing the trend of the recession years.

The reason is relatively straightforward. Where the previous government cut regressive, indirect taxes and introduced a new, progressive top rate of income tax, the current government has raised VAT and introduced swathes of benefit cuts. Overall, the poorest fifth of people will, on average, lose 6% of their incomes as a result of changes to the tax and benefits system. Those are the outcomes of the political decision to make the poor pay for the hangover of an economic boom from whose benefits they were systematically excluded.

Alas, it gets worse. The government’s deficit reduction plans do around a quarter of the work through tax increases, and three-quarters through spending cuts. The IFS focus in their analysis on private incomes (which include tax increases, but also £18 billion a year of benefit cuts), but decline to factor in the impact of cuts to public services. Even excluding benefit spending, the planned cuts to public services are estimated to equal 20.3% of the household income of the poorest tenth of households, compared with just 1.5% for the richest tenth. Public services may be an irrelevance to the rich few who can afford to opt out, but they’re utterly essential to millions of people.

After becoming accustomed to incomes largely going up and up, we face a prolonged period of getting poorer as a society. But those golden years were a lot more golden for some than for others. For three decades, inequality has been rising, as the rich have done better than ever, and the poorest have been left behind. There are myriad reasons, moral and economic, to tax progressively and protect the incomes of the poorest. Yet the opposite is happening.

It seems that, when we were getting richer, no-one cared that we weren’t all in it together. But as we struggle with the aftermath of the biggest recession since World War II, is it really fair that those with the least should be paying the most?

Strikingly, yet again, the cost of living for the poorest has risen faster than for the rest of society. At around 5%, the Minimum Income Standard rose half a percentage point higher than average inflation. Over the past decade, this has added up: the minimum cost of living has risen by 43% compared with 27% and 35% for CPI and RPI inflation respectively. That difference has been largely driven by the soaring cost of essentials like food and energy. Earlier this year, food price inflation peaked at 5.7%, compared with 4.4% for overall inflation. In August 2008, those figures were 14.5% and 4.7%, and there’s every chance there are further food price spikes around the corner.

All this means that the poorest need above-average increases in incomes just to stand still. Indeed, the JRF calculates that a family of four needs to earn 24% more than a year ago, while a lone parent with one child needs 20% more. This is partly about the rising cost of living, and partly because of the freezing or cutting of in-work benefits. There’s more detail in Chris’s blog.

In reality, however, government action is driving incomes in the opposite direction. A swathe of benefit cuts are reducing the incomes of millions of people, while a change to uprating to the lower, CPI measure of inflation will see decreases locked in year-on-year. Meanwhile, the National Minimum Wage continues to fall in real terms, with decreases in October 2008 and 2010 and a freeze in 2009. That’s before accounting for the fact that average inflation underestimates the real cost of living for people in poverty.

The Minimum Income Standard was a groundbreaking piece of work, as it tells us what ordinary people see as the minimum required to take part in society. This latest annual update is no less important, as it shows that much more is needed to meet the basic imperative of making sure poor people don’t continue to fall further behind.

This year’s update highlights some surprisingly big increases in what people need to earn just to make ends meet. It is clear that many millions of people in the UK do not manage to reach the standard and – for working families with children in particular – it’s getting much harder to do so.

For a family of four, the wage needed has risen to £18,400 per year before tax for each parent (assuming that both of them work full-time, and require childcare). This is a 24 per cent rise on the same figure in April 2010. For a lone parent with one child, the gross wage required has leapt to £18,200 from £12,500 last year. Equally large increases of above 20 per cent can be seen for most other working families who have to pay for childcare.

The cause of this rise can be put down to a combination of the freezing or cutting of in-work benefits, especially Childcare Tax Credits and Child Benefit, alongside a continuing increase in prices. Because of how Tax Credits are tapered (i.e. reduced as your wages rise), families have to earn more to cover even a small reduction in benefits.

These figures certainly demonstrate, then, that the squeeze has already begun. But it is not just low-income families in work and using childcare who are feeling the pinch. If you have to survive on out-of-work benefits, a couple with two children will only get 63 per cent of their minimum needs met and a lone parent with one child only 64 per cent. Pensioners, in contrast, are able to reach their minimum income standard if (and it is a big if) they collect all the benefits to which they are entitled to on top of their state pension. For single adults with no dependants, the amount provided by benefits falls to 44 per cent.

More positively for single people, if they do have a job and earn enough, they do benefit from the rise in the income tax personal allowance. This has offset some of the other pressures on their costs of living.

Projections last December by the Institute for Fiscal Studies, funded by JRF, have already shown that relative poverty is expected to rise considerably over the next three or four years. The analysis provided today by the Minimum Income Standard is further evidence of the pressure on budgets being felt by families on low incomes. This pressure looks set to continue escalating and is unlikely to be alleviated by the introduction of Universal Credit in 2013; not least because the Government is considering a new formula for childcare support which would cut entitlements further to save money. And, on top of all this, if earnings do not start to grow again soon, and if prices keep on rising, the future looks bleak indeed.

Research so far shows that the poverty and ethnicity are linked: the differences in poverty rates across different ethnic groups is one clear indicator of that: 17% for white British people, 23% for Indian people, 24% for black Caribbean people, 25% for people from Chinese or ‘other’ backgrounds and 52% for Pakistani and Bangladeshi people.

There are also big differences in employment rates, pay, education and caring responsibilities. However, here things become more complicated. The simple story of people from all ethnic minority backgrounds having uniformly worse outcomes than people from white British backgrounds doesn’t hold. Two key areas are work and education; in both of these the evidence so far shows some interesting and complex patterns.

In the workplace, research has demonstrated very clearly that there is discrimination in recruitment against people with names that do not appear to be white British. This tends to be more common in the private sector and smaller employers than in the public sector and larger employers. However, discrimination does not explain all of the differences in employment rates, nor levels of in-work poverty across different ethnic groups. Part-time work and self employment are more common among some ethnic groups, as is working in particular types of sectors – all of which affect pay. Pakistani, Bangladeshi, and black people are also paid less on average than those with similar qualifications from either white British or Indian backgrounds. All of these patterns are affected by the decisions that people make, where they live, and the social networks they have.

In education, when children start school, those from Indian, Chinese and Bangladeshi back grounds tend to be behind those from white British backgrounds. However, this changes over time so that Indian and Chinese pupils end primary school with the highest attainment. In secondary school, young people from Traveller backgrounds have the lowest attainment overall while white British boys from poor backgrounds make the least progress. However, recent analysis has highlighted variations across the country in results for children from the same ethnic and social backgrounds; another reminder of the dangers of making broad statements about ethnicity.

Looking across the available research, a couple of key themes emerge. First, thinking about ethnicity in isolation is pointless. To understand how ethnicity affects people’s choices and opportunities you also need to think about a range of other things including their gender, age, class, health, religion, history and neighbourhood.

Second, outcomes for individuals come from the interaction of two broad sets of factors:

• Informal processes: individuals’ decisions and assumptions; perceptions of risk and opportunity; how families, communities, employers and others shape attitudes.
• Social and economic structures: labour markets, housing, services, social norms.

Too much of the debate on these issues reflects only one side of this. Some talk as if individual decisions are all that matter and people can simply be persuaded or pressured into making the ‘right’ choices and this will lead them out of poverty. Others challenge this by emphasising the importance of structural disadvantage so strongly that it sounds as if people are simply victims of unfair practices and have no control and no role in addressing their own situation.

The final thing that has struck me very strongly is the importance of location in all these issues. National patterns tend to look very different once you start to break them down by local areas. Interesting variations emerge. Why are just 29% of black African women in Camden in full-time employment as opposed to 40% in Southwark? Why are three times as many Pakistani women in Camden employed as they are in Newcastle? Why is Peterborough one of the places in the country where Asian people are most concentrated in deprived neighbourhoods, and black people the least concentrated in them?

Over the next five years we will be funding in-depth research that aims to significantly advance our understanding of how poverty and ethnicity are linked. We aim to use this to develop more effective strategies for tackling poverty across the UK and among all ethnicities. At the moment this feels very exciting, and also rather daunting.

Want to know more as it happens? Sign up for your email alert here.

Helen Barnard is Programme Manager with the Joseph Rowntree Foundation, where she manages the child poverty, education, and poverty and future labour markets programmes. She is also developing a new programme focusing on poverty and ethnicity.

Don’t doubt for a second that a Robin Hood Tax is possible.

France now has the G20 presidency, and President Sarkozy is pushing for a Robin Hood Tax. Germany, Spain and other European countries are all in favour of bigger bank taxes. 1,000 economists have added their voices. And – most importantly of all – an awful lot of people, like you, are seething about the banks’ outrageous return to business as usual.

But a Robin Hood Tax can only become a reality if we stand up and shout together. So we’ve developed a brand new tool that allows you to talk to your MP in the most effective way.

Take action now

The Robin Hood Tax campaign has been out on the road looking at what the banks have done to Britain. From Sure Start centres to Food Banks we’ve been finding out why we need a Robin Hood Tax.

Show me the stories >>

Thank you, as ever, for your brilliant support.

Robin.

Encouragingly, the campaign is gaining strength and important international support. Earlier this month, a thousand economists wrote to G20 finance ministers meeting in Washington to show their support for the tax. Gathered from 53 countries, experts such as Professor Jeffrey Sachs (advisor to Ban Ki-Moon) commended the tax as ‘technically feasible’ and ‘morally right’, and urged politicians take action that could raise billions of dollars to help the world’s poor.

Several fantastic events have helped raise awareness of and support for the tax among the public. Half a million people descended on London to ‘March for the Alternative’ on the 26^th of March, with the Robin Hood Tax cited as a strong part of the argument against cuts.  Indignation at the banks’ ability to ‘get away with it’ was the key note at the NEF/ Fink Club event ‘Where did all our money go?’, while a debate at St Paul’s Cathedral ‘Should we bank on the Robin Hood Tax?’, chaired by Evan Davis,  focused on to what extent banks have a responsibility to contribute to the common good and whether, if so, the Robin Hood Tax might be the solution.

It’s easy to get lost in abstractions and debates, but ultimately the Robin Hood Tax is about raising vital funds for real people, both abroad and here in the UK. To understand more about where such revenue might be spent Robin Hood (or at least four of his merry band) took to the road to find out more about the vital services people across the country rely on – services which now face crippling cuts. Bill Nighy joined the visit to a food bank in Wales, Sam West visited a Sure Start centre in Corby, and many other people and services were able to share their stories and fears for the future.

What can you do? Watch, read, find out more and please please spread the word. For more info, and all the latest visit the RHT site – http://robinhoodtax.org/

I can’t wait till I get the chance to vote for Isha – she’ll be a tremendous Prime Minister!

Why her words are so profound (she certainly isn’t the only wee person who has said they’d like to be Prime Minister) is that her words reflect what we need more of in our political system.  We need brave politicians (as brave as wee Isha) who are willing to contemplate, let alone implement, changes to a system that perpetuates, and arguably depends on, poverty.

But how do we make sure our leaders are already so enlightened, rather, than having to spend time and energy ‘enlightening’ them?

Why is it that our political leaders are so removed, so remote? 

Part of the reason is that they continue to listen to a self-appointed intelligentsia preaching that poverty is caused by personal or individual deficiencies; that poor people simply need more ‘structure’ in their lives, more love, and basically more of what the intelligentsia like to think they epitomise.

Instead, what we need are leaders who appreciate and understand that we need to face up to a system that not only perpetuates but also systemically ‘invents poverty’, as Isha said.

Why? Because of the inequality that defaces our society and our economy. Because of power imbalances that mean that our political and economic leaders are all too often drawn from a narrow group of distant people, not those who understand what it means to be poor and the many ways in which people are actively prevented from moving out of poverty.

Changing this requires looking at our unequal structures that concentrate power and influence in the hands of those who already have great wealth.  It also means stepping back from the deference we seem to pay to the least deserving – those who use their power to keep it for themselves and those like them.

In doing so we’ll need to explore practical progress en route to tackling the systemic causes of poverty and inequality.  Asset focused development and participatory budgeting are mechanisms to empower communities to create and own the solutions.  They represent a shift of real power, focusing on assets rather than deficits in our communities and transfer of budgets.  This is so much more substantive than the current modes of consultation which are invariably within predetermined parameters and where the issues up for consultation are the low-level minutiae, the details, not the very agenda itself.  It is about doing the economy for ourselves, not allowing ourselves to be dominated by an economy that doesn’t work for the people. 

Here’s hoping Isha gets a run for Prime Minister soon, because I have every confidence that she will be able to shift power and wealth from the few to the many, to structure our economy so that it serves the people, rather than the other way around.

Despite the fact that the event was by, for, about and from people living in poverty in Scotland, the audience was brought to attention by a welcome to ‘Honourable Lord Provost, Distinguished Guests, ladies and gentlemen’.  Such a hierarchy in offering welcome always annoys me – it reminds me of the order of pews in churches a hundred years ago, with the rich, the landed, the powerful and the connected getting the best seats at the front.  Perhaps today’s parallel is the spectrum of seats and corporate boxes at the football?  Though in this case, I like to think that in using the term ‘Distinguished Guests’ it was the people who were experiencing poverty present at the Poverty Truth Commission whom the announcer had in mind. 

And in a way, it was the very opposite of any implied hierarchy that was the theme of the whole afternoon.  The Poverty Truth Commission talked of the importance of the 30 or so Commissioners (people living in poverty and members of Scotland’s ‘civic society’) all ‘leaving their labels and titles at the door’ during their deliberations.  This was about treating each other as equals, as fellow Scots, as fellow community members, as fellow Commissioners. 

To me, this was one of the most crucial lessons that emerged from the Commission’s work.  That we are a rich country (where, as the Poverty Truth Commission reminds us, people still go hungry) which implicitly and explicitly tolerates great extremes of wealth is surely due, at least to some degree, to a lack of empathy; namely those holding power and wealth lacking empathy with those experiencing poverty and vulnerability. Distance between these groups perpetuates ‘othering’ and assumptions of difference, which deepen gulfs of recognition and understanding.  Ultimately, a lack of connection undermines solidarity and concern for one another.

What the process of a Poverty Truth Commission sought to do was break down this distance.  This ethos, of participation, involvement and going beyond simplistic consultation is mirrored in the Poverty Alliance’s EPIC (evidence, participation, change) project.

But it seems we need a scaling up of such projects so that they are not necessary.  We will know we’re there when the principles of projects like the Poverty Truth Commission and EPIC are reflected in the very doing of politics and where political decisions and our economic and social and institutional structures are based on deep empathy, rather than on exclusion, elitism, vested interests and stigma.

One of the calls made by the Poverty Truth Commission was for the ‘people of Scotland to share our growing outrage at the huge and growing levels of disparity which exist between rich and poor’.  Reversing these disparities would, of course, be the real reconciliation. 

And such reconciliation is more important than any VIP could imagine: current inequalities are tearing up the fabric of concern and empathy that are necessary to support our vital institutions of social support, welfare, common good and shared interests.  Without these institutions, we are essentially two countries and two societies, with two, very different, futures.