The "just about managing" may soon not be managing at all

Theresa May has been vocal in her ambition to support those who are “just about managing.” In her words, these are “ordinary, working-class families” who go to work, pay the bills, but struggle to improve their standard of living or achieve long-term financial stability.

She is right to highlight the problems faced by this group. In the UK today, there are eight million people who are not at high risk of poverty, but who still don’t have enough for a decent standard of living. Eleven million more are so far below what they need that they are likely to be living in poverty.

These figures are shocking, but not unexpected—The Joseph Rowntree Foundation’s annual Minimum Income Standard (MIS) report has been tracking living standards in the UK since the financial crash, and over that time it has recorded a significant rise in the number of people who are falling short.

The report, which calculates what people must to earn to have an acceptable standard of living, as defined by the public, finds that the cost of achieving this has risen by 30 per cent since 2008—twice the rate of average earnings. This squeeze on household budgets will intensify. Inflation hit its highest level since June 2014 last week, and forecast inflation implies the cost of an acceptable standard of living could be 10 per cent higher by 2020.

The government cannot afford to ignore this problem. Since the referendum, Brexit has taken up a huge amount of its energy, and with Article 50 due to be triggered in a few weeks’ time this is not going to change. There are challenging times ahead with a period of political and financial uncertainty, but the spotlight is now firmly on what is happening to struggling families and struggling places across the country. The government must concentrate its efforts to reinvigorate their prospects as part of its post-Brexit plan.

With the Budget next week, the government has a real opportunity to put its money where its mouth is.

Ending the freeze on working age benefits is an obvious first step, to ensure the value of benefits keep pace with prices as they rise. This would help those who rely on the state to top up low pay and those who are out of work—six in 10 households below MIS have someone in work. But the benefit system can only ever be one part of the solution. A longer-term fix will involve tackling the long tail of low paid, low skilled jobs in the UK.

The government’s recently launched Industrial Strategy Green Paper focussed on improving maths and technical education for those still in school, and supporting the creation of high- skilled roles. These will certainly benefit the economy in the future. But by ignoring the millions of workers who are, right now, struggling with job insecurity, low pay, and a lack of opportunity, the government is missing a chance to improve their lot and give a valuable boost to the wider economy.

In the Industrial Strategy, the government pledged to use the Budget to set out plans for retraining workers in industries that are at risk of decline. As part of this package it should set an ambitious target to meet all basic skills needs by 2030—it is a scandal that five million people in the UK lack basic literacy and numeracy skills, and over 12m lack basic digital skills.

The Industrial Strategy also aims to close the gap between our best performing companies, industries, places and people and those that are less productive. Delivering on this is essential. The only way this can be done is if the government moves beyond the current strategy and adds measures to boost the productivity of low-paid sectors and workers. This will be good for the economy and good for living standards: sectors such as retail, care and hospitality constitute only 23 per cent of the UK economy, yet account for around a third of the productivity gap with leading Western European economies. They also contain a larger proportion of employees experiencing working poverty.

In the UK today, low pay, rising costs and cuts to benefits and tax credits means that there are more and more people who are just about managing. As rising inflation begins to bite into finely-balanced budgets, there is a real danger that they will tip over into not managing at all. The government cannot afford to lose sight of the issues that affect people’s day-to-day lives as it negotiates its Brexit deal.