Increasing poverty in New Zealand and Britain

NZ: Record queues for Christmas food

Beneficiaries and people on low incomes are flocking to the Auckland City Mission for parcels and gifts

NZ Herald,

21 December, 2012

Fuelled by the highest rate of unemployment in 13 years, the queues snaking along the pavements outside the Auckland City Mission have nothing festive about them.

"I keep saying every year it's unprecedented ... but I'm almost beyond words when I look out there," said missioner Diane Robertson. "This is nothing to celebrate."

More than 100 people were lined up on Hobson St and round a corner into a neighbouring lot yesterday, some since 5am, to receive charity - Christmas food parcels and donated gifts for children.

The majority did not want to appear in the newspaper. "Maybe if I had won something or it was something lucky," a woman said.

Ms Robertson said the mission's clients were struggling with unemployment and entitlement cuts. "They're losing options."

And the continuing recession was adding people to the queue as those on low incomes fell into the same poverty cycle as beneficiaries.

"As an agency we really try to get people off benefits and employed - make life better than it's been," Ms Robertson said. "But right now we're just alleviating poverty, because there's no place to go."

Ms Robertson said the mission expected to help about 2000 people this Christmas with food parcels, a new record.

The Quarterly Labour Force Survey in September found 175,000 unemployed people in New Zealand, up 13,000 in three months - and 12.4 per cent higher than last year. At 7.3 per cent, the unemployment rate was at a 13-year high. And the number of people employed dropped by 8000 for the quarter.

Meanwhile, welfare reforms have seen the introduction of penalties for failing to accept work. Work and Income officers were at the mission to identify those who needed help. Benefits could be paid on the spot to be available before Christmas.

A woman in the queue, who did not want to be named or photographed, said she had left her Papakura home at 4.30am to get some gifts for her children. Her sister had driven her into the city. She said this year had been particularly difficult.

"It's been hard. Really hard."

She was thankful for a bit of help to put on some kind of Christmas for her family, she said.

Another woman said it was her first time at the mission after hearing about it through a friend. Rising prices at the supermarket had been crushing, she said.

But others were at least able to talk now of Christmas plans with family, gathering siblings together and hopefully heading to the beach if the sun turned out.

The growing deprivation is part of a longer-term trend as well. Nationally, Work and Income gave out 144,000 food grants in the first full year they were recorded, 1992-93, but last year this had increased to 554,000, including 150,000 in Auckland.

UK: Christmas food handouts double as millions face 'financial precipice'

Debt-ridden households could kill off economic recovery when interest rate rises, says Resolution Foundation

the Guardian,

22 December, 2012

The number of people who will turn to food banks for sustenance is expected to double this Christmas, as a new report warns that millions more families face a financial "precipice" due to high personal debts, flatlining wages and future interest rate rises.

With three new food banks opening every week in the UK, the charity that oversees Britain's 292 emergency outlets, the Trussell Trust, says it expects to feed 15,000 people over the Christmas fortnight alone, almost double the number last Christmas.

At the same time, a study published by the Resolution Foundation, an independent thinktank, says millions of households with low to middle incomes will be pushed close to the edge if they are unable to reduce their debts, including mortgages, before the cost of borrowing returns to more normal levels.

Volunteers who are giving up part of their holiday to help run food banks – from students to pensioners and representatives of local businesses – will be out in record numbers across Britain this week, distributing food to those who cannot afford a decent Christmas. Their aim is also to tackle "hidden hunger" – that affecting people who refuse to accept free food because they think it carries a stigma.

The Resolution Foundation report exposes how millions of families, unable to pay off debts, are facing a crisis if interest rates are pushed up in coming years to keep inflation down.

Matthew Whittaker, senior economist at the Resolution Foundation and the author of the report, On Borrowed Time?, said: "Debt levels are a major concern for a substantial number of families struggling under a burden of repayments, even as things stand.

"There is a very real prospect that borrowing costs will rise more quickly than incomes and that lenders will become less flexible over repayments. Many households are already in a very exposed position, even with interest rates on the floor, so even small changes in the financial outlook could have a dramatic effect.

"All this threatens to make the burden unbearable for many debt-loaded households, particularly those on lower incomes. This would be dangerous at any time, but it looks especially so in the current era of frozen wages, under-employment and faltering living standards."

Figures published last week by the Bank of England showed that 3.6 million households – 14% of the total – now spend more than a quarter of their income on debt repayment, including mortgage costs. The Bank also says that up to 1.4 million households (12% of those with mortgages) are in special measures with their bank, having asked for temporary deals from their lenders.

The RF report shows that debt is distributed unevenly across income groups, with those in the poorest 10% of households spending on average 47% of their monthly income on debt repayments, compared with 9% for the richest 10%.

It also highlights how 2.4 million households with a mortgage (one in five) are spending more than 25% of their gross income on mortgage repayments alone – at a time when interest rates are at just 0.5%. Before the debt boom of the 2000s, only 15% of households were in this position, even when interest rates were as high as 7%.

The debt problem is likely to be all the more serious for struggling families because wages and household incomes are likely to stagnate over the next few years. The RF suggests that the average full-time wage will rise no higher in real terms than its 2000 level of £26,200 until at least 2017 – down from a peak in 2009 of £29,000.

Few economists expect interest rates to rise in the near future – almost certainly not in 2013 – but after that the Bank of England would be under pressure to raise rates to see off the threat of inflation were the economy to show signs of recovery.

The report notes the delicate balance that the Bank – under its newly appointed governor, Canadian Mark Carney – will have to strike between controlling inflation through raising interest rates and creating a risk of mass mortgage default and increased bankruptcy rates, which could combine to derail any nascent recovery in the economy.

The report says: "The prospect of interest rates rising and forbearance [special arrangements people set up with banks to help them through] being removed while incomes continue to stagnate heightens the risk of future defaults. Such an outcome may yet slow down, or stall, economic recovery: at some tipping point the micro issue becomes a macro one. In this eventuality, we may find that the green shoots of recovery just sprouting in the UK economy prove to be living on borrowed time."