POVERTY could increase after a no-deal Brexit if the Government allowed tax credits to fall behind inflation, leaving low-income households “disproportionately affected”, the Joseph Rowntree Foundation (JRF) has warned.

Its analysis finds that “the price inflation caused by a ‘No deal’ scenario could cause an additional 200,000 people to be in poverty if the Government updated benefits and tax credits only by 2 per cent rather than by the higher rate of inflation caused by Brexit”.

Brexit’s position as the main policy challenge for the Government has allowed other areas, such as tackling poverty, to be crowded out, the JRF says.

The report says that this is leading to an absence of action on domestic issues that affect the day-to-day lives of the UK’s population”, and that this “is particularly worrying in relation to poverty”.

The charity says, however, that poverty would not be solved if Britain remained in the EU, nor will it vanish after Brexit.

The study says: “Our research shows that completing Brexit will not solve UK poverty; and remaining in the EU would not undo policies that will lead to higher poverty over the next few years.

“Rising poverty is primarily a result of domestic-policy decisions and of the systems and markets that we have designed. The housing market, the labour market, and our social-security system lock people into low incomes, creating daily struggles to get by.”

It continues: “The vote to leave the EU represented widespread anger and dissatisfaction across a number of issues, including low living standards and a lack of opportunities in some parts of the country.

“Delivering any brand of Brexit is highly unlikely to solve these problems. Our analysis suggests that poverty would be effectively addressed by increasing access to low-cost housing, increasing employment and earnings, and reforming Universal Credit.”

The report also says that child poverty is expected to continue rising, but it says that this is unconnected to Brexit so far. Despite this, it says that “many of the worst-hit areas are also highly exposed to changes in trade with the EU and any loss of regional funding”.

In briefing papers released last week, it was revealed that a no-deal Brexit scenario could automatically end the recognition of UK driving licences by EU countries, and vice versa, causing chaos for lorry drivers across Europe.

Mobile-phone bills would also be affected, as EU rules on roaming for data, and calls and messages would no longer apply, meaning that bills would increase.

The Brexit Secretary, Dominic Raab, said: “Getting a deal with the EU is still by far and away the most likely outcome.”

Take a look at our Brexit special here.