In his Budget speech on Wednesday, the Chancellor said he will continue to do ‘all it takes’ to help families get by during the pandemic. But even with the furlough and the £20 uplift to Universal Credit (both of which have now been extended until the autumn) nearly one in three people have been living without enough to get by.
The reality is that, even before the pandemic, 3 in 10 people in the UK had to live on incomes below the level needed for day-to-day costs, as measured by the Joseph Rowntree Foundation’s (JRF) ‘minimum income standard’ (MIS). This stark living standards crisis has only been exacerbated by the uneven impacts of the pandemic, with those on lower incomes, from minority backgrounds, or with disabilities particularly badly hit. A recent study by the Legatum Institute estimated that almost 700,000 people had been driven into poverty in the UK during the course of Covid-19.
Contrary to the Chancellor’s pronouncement that ‘10 years of Conservative governments painstakingly rebuilt our fiscal resilience’, the pandemic has painfully exposed how a decade of austerity has left our benefits system threadbare. The JRF estimate that in the decade before the pandemic, the number of people living below the MIS increased by over three million.
For those previously on benefits, the shortcomings of the UK’s social security system and its increasingly punitive approach were already obvious, but the pandemic has revealed this fact to many more people newly reliant on state support. The £20 uplift barely papers over the cracks, and still leaves families worse off than they would have been if the 2010 benefits system was still in place.
The weakness of our benefits system is a particular concern because it is mainly those working in low-income sectors who have been affected by unemployment or loss of income or hours over the last year. The sectors that were either shut down or severely restricted by the pandemic, like ‘non-essential’ retail, hospitality, and tourism, are more likely to have low-paid workers. This has also disproportionately impacted women and ethnic minorities, who are overrepresented in these sectors.
Whether working or not, people on low-incomes have been exposed to the twin perils of economic and health risks as a result of the pandemic. Those who were furloughed or lost work and had to rely on our inadequate benefits system suffered from losses of income. But those who kept their work and remained on the frontline as key workers were exposed to the virus.
People who previously were paid around the minimum wage found that their income dipped below the legal minimum when they were moved onto 80 percent wages on furlough. Families on low incomes have also had to increase their spending because of school closures and other pandemic-related disruptions, often having to draw on their savings or go into debt to make ends meet.
On the other hand, those on medium-to-high incomes, who were able to work from home and keep their full pay while spending less on commuting and social activities, saw their savings substantially increase.
The support offered to people relying on our social security system, while a lifeline to many, left out some of the most vulnerable. One group is the many existing claimants on ‘legacy’ benefits (those predating universal credit) who have not received the £20 weekly uplift. This includes many disabled people, despite their increased health risks in a pandemic and increased costs to support themselves.
Many migrant workers—possibly as many as 1.37 million—were also excluded from support through the ‘no recourse to public funds’ policy, leaving them with little choice but to continue to work even when unsafe or if they were unwell. This policy has exacerbated racial inequality, impacting Black, Asian, and minority ethnic (BAME) people in particular.
Similarly, government support schemes for people in work excluded some types of employment, particularly among the self-employed. The Resolution Foundation found that 500,000 self-employed people were without work and not receiving support as of last September.
The latest changes to the Self-Employed Income Support Scheme will now cover those who began to be self-employed in 2019/20, as long as they have submitted a full tax return. But this will not be backdated to cover last year’s payments, and there are still gaps in the scheme.
Despite all of the government’s tinkering, many people continue to face the impossible choice of going into work and putting themselves at risk or trying to survive on inadequate benefits or the UK’s painfully low statutory sick pay. If the pandemic has taught us one thing, it should be that if we don’t protect everyone, we don’t protect anyone.
Fortunately, public opinion is changing more and more. In a sharp reversal of attitudes of the past decade, more people now agree that current benefits are too low – even with the £20 uplift in place.
This is likely because of how many people have relied on social security over this past year. The most recent data shows that there are 5.9 million people on universal credit, 3 million receiving housing benefit, 2.5 million receiving personal independence payment, 1.9 million receiving employment support allowance, 1.4 million receiving disability living allowance, and 0.3 million receiving jobseeker’s allowance. There is an appetite for a reform to how we design our safety net.
If Rishi Sunak really wants to do ‘all it takes’, then what he announced on Wednesday is not enough. Extending the furlough scheme and the £20 uplift until September merely postpones the cliff edge for those currently helped by these policies.
When these policies are wound up, our analysis at the New Economics Foundation has found that by November, over 21 million people will be living on incomes below the level needed for day to day costs (MIS), with 12.5 million at a particular risk of material deprivation. Both of these numbers will be substantially higher than last September, in the midst of the pandemic.
The measures announced in the Budget do little to prevent the deepening of the UK’s socioeconomic inequalities or address the gaps in support for vulnerable groups like disabled people on legacy benefits, and many migrant workers and their families impacted by ‘no recourse to public funds’.
But an alternative is possible. The Chancellor should outline a roadmap for a living income for all, starting with an emergency minimum income guarantee, making sure no one is excluded and everyone has enough income to live in dignity, whether in or out of work.
The effects of the pandemic have not hit all of us equally – but this was not inevitable. It is the conclusion of a decade of austerity cuts targeting the most vulnerable. With a living income, we could start to undo these effects and the existing inequality that came before it.