Two million more set to be living in poverty by the next election

THERE could be as many as 2 million more people living in poverty by the next election, despite the Government's efforts to reform welfare.

The warning, from a left-of-centre think-tank, is based on two main weaknesses of the Government's strategy: the refusal to restore the link between benefits and earnings, rather than prices; and the prospect of an increase in unemployment as the economy slows.

Writing in New Economy, the quarterly journal of the Institute for Public Policy Research, David Piachaud, Professor of Social Policy at the London School of Economics, says of the Chancellor's strategy: "It is radical as far as it goes but it is not enough." It will do little to tackle the legacy of poverty and inequality inherited from the previous government, he says.

On the definition known to economists as "relative" poverty, the number of people living on less than half of the national average income, the article sets out this inheritance. The number soared from 4.4 million, or fewer than one in 10 of the population, in 1979 to 10.3 million, or nearly one in every five Britons in 1994/95.

A third of the poor are children, living in either lone parent or unemployed households. This means that a quarter of all British children grow up in poverty.

Professor Piachaud estimates how far the numbers in each category might increase by the year 2002. The good news, he calculates, is that the rate of growth in the number of lone parent families might slow for demographic reasons as the tail end of the baby boom generation gets beyond peak childbearing age.

He also calculates that the Chancellor's New Deal to get the unemployed into jobs could reduce unemployment by a cumulative total of up to 400,000. In addition, the introduction of a minimum wage at pounds 4 an hour would lift about 300,000 of the working poor above the poverty line.

On the other hand, the outlook depends on the success of macroeconomic policies at keeping unemployment down. As the economy slows, a higher unemployment level could add up to 800,000 to the numbers in poverty.

But the biggest impact will come from the Chancellor's announcement in his July Budget that Labour would not restore the link between benefits and earnings broken by the Conservatives. Professor Piachaud concludes: "It is not only the number that would be increased. Those who are already poor would become even poorer."

The net impact will be an increase in numbers of between 350,000 and 2 million by 2002, taking the total as high as 12 million.