By Dora-Olivia Vicol - 05 March 2021
With furlough and the Self-Employed Income Support Scheme (SEISS) extended to the end of September, the Chancellor’s Spring Budget is good news for people who are already in secure employment or running a business. Six months of additional government support may just be what companies need to get by, before lockdown is lifted and economic activity returns to normal.
But for the 6 million people who rely on Universal Credit (UC), the Chancellor’s decision to end the £20/week uplift in September is a tragedy. The UK will return to one of the least generous welfare systems in the developed world. Their recovery won’t be fueled by the threat of poverty. It will need the certainty of financial security, followed by investment in training, mental health support, and a vision for secure jobs that won’t require income top-ups.
The £20 uplift was never generous
As the pandemic slowed the economy, the number of UC applications soared. A whole 6 million people were claiming the benefit in January 2021, compared to 3 million in March 2020, with some media reporting as many as 400+ claims every hour. But the uplift was never generous.
Recipients of legacy benefits were always excluded from the Chancellor’s £20 uplift. Even with the uplift, UC recipients were struggling to make ends meet. A third of new claimants reported their family income to be at least 40 per cent lower in January 2021 than its pre-pandemic level, according to recent research by the Resolution Foundation. The same survey found that one-in-five benefit claimants were behind on essential bills, and another third were more in debt than they were in February 2020.
Pre-pandemic UC levels were one of the stingiest in the developed world
Returning to pre-pandemic UC levels would mean embracing one of the least generous unemployment packages in the OECD. A single adult claiming unemployment benefit in the UK for six consecutive months, as 0.7million have done this year, would have earned a mere 17% of their previous employed income.
Another worrying record is that the UK’s has the highest childcare costs in the developed world. Childcare costs for low income couples, where one parent earns minimum wage, and the other an estimated 24,000/year, take up a whole 40% of the family’s monthly income. Every week advisers at the Work Rights Centre hear from women who have resigned themselves to domestic responsibilities, simply because paying for childcare is more expensive than what they would earn.
The end of the £20 uplift will be particularly tough for migrants
The end of the £20 uplift will have the perverse effect of hitting the poorest the hardest - and migrant workers are especially exposed. At the Work Rights Centre, we often encounter beneficiaries who are excluded from the housing benefit element of UC, simply because they lack the ability to evidence housing costs. Unable to afford contract-bound accommodation, they live in house shares sublet informally, where rents are paid in cash and negotiated on a handshake. This informal living isn’t a choice. It’s the only option available to workers in the zero-hours economy, who fail to accumulate the savings and the earnings needed to meet the requirements of rental agencies, and are pushed towards informal arrangements by design.
As many as 41% of Work Rights Centre beneficiaries live in house shares without a contract. All of them risk missing out on a vital component of UC. Without the housing element of UC, a single adult applicant is left with a paltry £409 a month. This is meant to cover food, bills, and rent for a month. It is simply unlivable.
The Government must keep the lifeline
This Budget announced on 03 March hinges on a business-led recovery. The phasing out of furlough and SEISS in September are grounded in the belief that the UK is on a “cautious but irreversible roadmap to ease restrictions”. Business rate and VAT freezes, restart grants, and a ‘super deduction” scheme allowing businesses to shave 130% of investment costs from their taxable profits, are all meant to support business recovery.
But we cannot cheer a Budget that turns its back to the most vulnerable - especially when, even in five years’ time, the Office for Budget Responsibility (OBR) expects the economy to be 3% smaller than it would have been without Covid. A smaller economy means fewer jobs. There are also many uncertainties ahead. The new furlough scheme will ask employers to contribute 10% from July, and 20% from August. If economic activity fails to pick up as expected, businesses may well resort to further redundancies - as we’ve explained in an earlier piece, zero hours contracts make it all too easy to fire workers, and legal aid cuts all too difficult to challenge dismissals.
Ending the £20/week uplift is a blow to the unemployed and underemployed. For the UK, it will mean a return to one of the least generous unemployment support systems in the industrialised world. For claimants who only qualify for the £409/month, it’s unlivable. We must demand better.
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