Employment & Economy

Falling Faster amidst a Cost-of-Living Crisis: Poverty, Inequality and Ethnicity in the UK

Written by:
Daniel Edmiston, in collaboration with Shabna Begum and Mandeer Kataria
Read time:
20 minutes

Black and minority ethnic people are disproportionately falling faster and further below the poverty line amidst the cost of living crisis.

Falling Faster shows that Black and minority ethnic people are 2.5 times more likely to be in relative poverty, and 2.2 times more likely to be in deep poverty (having an income that falls more than 50% below the relative poverty line), than their white counterparts. 

Progress towards closing the economic gap between white and minority ethnic communities has stalled since the 2007-08 financial crisis, with inequalities becoming particularly pronounced since the pandemic. As a result, Black and minority ethnic people are heavily over-represented amongst the lowest-income groups and are currently experiencing much higher levels of food insecurity, material deprivation and fuel poverty as we are starting to feel the effects of the cost of living crisis.

‘Falling Faster’ shows that:

  • Black and minority ethnic people are 2.5 times more likely to be in poverty than white people, with racial inequalities most pronounced in Wales, Scotland, Northern Ireland and Yorkshire and the Humber. 
  • Beneath the poverty line, average incomes for Black and minority ethnic people have fallen faster and deeper (by six percentage points) than they have for white people (by 1 percentage point) over the last decade, with this becoming particularly pronounced since the start of COVID-19. 
  • Despite only making up around 15% of the population in the UK, more than a quarter (26%) of those in ‘deep poverty’ are from a Black and minority ethnic background, and make up a growing share of those on the lowest incomes.
  • As a result, Black and minority ethnic people are currently 2.2 times more likely to be in deep poverty than white people, with Bangladeshi people more than three times more likely.  
  • Over the last decade, changes to the tax and social security system have been highly regressive, but also racialised. In real terms, white families now receive £454 less a year on average in cash benefits than they did a decade ago. But this rises to £806 less a year for Black and minority ethnic families and even higher to £1,635 for Black families. Black and minority ethnic women have been some of the worst affected and currently receive £1,040 less than they did a decade ago. 
  • These developments have left many Black and minority ethnic households disproportionately exposed to the current cost-of-living crisis. In nominal and relative terms, the ‘Energy Price Guarantee’ announced earlier this month will lift more white households out of fuel poverty than Black and minority ethnic households. As a result, just under a third (32%) of White people are likely to experience fuel poverty this winter compared to more than half (52%) of Black and minority ethnic people (rising to two thirds (66%) of Pakistani and Bangladeshi people). 

Black and minority ethnic people were most affected by the economic shocks associated with the 2007-08 global financial crisis and COVID-19. As we head into a new crisis of living standards and likely recession, a renewed and reimagined commitment to protecting those in the deepest forms of poverty is needed if we are to protect those most vulnerable, close the economic gap, and achieve racial equality. In Falling Faster the Runnymede Trust makes a number of recommendations:

  • Appropriately target support to the communities most in need - cost-of-living payments to means-tested social security recipients (currently worth £650) should be significantly enhanced and extended to help the lowest-income households meet rising costs; 
  • The government should also adequately resource the Household Support Fund and target additional funds towards local authorities with the highest rates of child poverty
  • The government should rethink how the blanket interventions proposed by the Truss administration are going to be funded. The UK should follow the EU and introduce a Windfall Tax on the excess profits of energy companies to ensure targeted interventions are effectively funded through a broad tax base that is socially progressive and sustainable in the long-term;
  • Strengthen and expand social security measures. In the immediate term, a real-time uprating of social security in line with rising inflation would address the growing gap between entitlement and need, and protect against deepening poverty amongst minority ethnic communities. In line with COVID-19 precedents, the government should permanently reintroduce and extend the £20 uplift to all those relying on Universal Credit (as well as other mean-tested legacy benefits). Recent announcements threatening to reduce benefit levels for certain Universal Credit claimants represent a continuation of punitive activation measures that are known to be highly counter-productive at supporting people into (more) work. Such approaches should be abandoned;
  • Improving access to support for communities with diverse needs. The ‘digital-by-default’ benefits system and move towards remote forms of welfare rights advice have undermined equality of access for many hyper-marginalised groups since COVID-19. As a result, many Black and minority ethnic people are unable to access the benefits they are entitled to due to issues of digital access or support. Community-centred services that cultivate trust and tailor services to the diverse needs of Black and minority ethnic people are sorely needed. Tailored, in-person and flexible services must be delivered with minority ethnic people to ensure equal access to social security, welfare rights advice and support;
  • Scrapping no recourse to public funds. During the pandemic, up to 1.4 million people were excluded from financial support altogether with the vast majority (82%) affected being from a Black, Asian or minority ethnic background. The UK government should suspend the NRPF condition with immediate effect to prevent widespread destitution amongst those currently affected in the coming winter. At a minimum, the Home Office should publicly report on ethnicity data of those with NRPF.

We also makes a number of recommendations for long-term, systemic changes, including:

  • Expand measurements to better understand deep poverty;
  • Collect and disclose ‘hidden statistics’;
  • Apply a racial lens to ‘levelling up’;
  • Tackle income inequality

“The growing rates of poverty outlined in our briefing, in the world’s fifth largest economy, are simply unconscionable. We talk about this cost-of-living crisis in universal terms. No one is immune from the consequences. However, what’s clear from this research is that some groups are less equal and more impacted than others, including our black and minority ethnic communities. 
“The pandemic made abundantly clear that when a crisis hits, support needs to be targeted urgently towards those who will be worst affected, usually those at the intersection of multiple structural inequalities. More must be done not just to stave off but to reset the economy in light of a catastrophe that is snowballing, fast.
“In funding the energy price cap through public borrowing, offering tax cuts for the wealthiest and lifting the cap on bankers’ bonuses, the Government is doing little to demonstrate its willingness to prioritise the solutions that will be increasingly and desperately needed by our multi-ethnic working class. Without continued and significant public investment in social security and infrastructures, and tailored commitments to job security and fair wages, Black and minority ethnic communities in particular will continue to face hardships unknown for generations.” - Dr Halima Begum, our CEO

“Differences in relative and deep poverty may be something we talk about as percentage figures, but in real life we are talking about the pounds and pennies that make the difference between survival and destitution. For so many of our Black and minority ethnic families this means making decisions about whether to use their gas cooker or only buy food that can be heated in a microwave, whether parents eat or feed their prepayment electricity meter, or whether they can afford the £1 donation to charity their child’s school is requesting for non-uniform day. These are devastating decisions which leave scars that last for generations.” - Dr Shabna Begum, our Head of Research

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