Universal Credit: why we must keep the increase
There are many reasons why. However one of the most compelling is the impact that trapping so many people in poverty has on their health.
The link between poverty and poor physical and mental health is well established. It is a major driver of low life expectancy and directly contributes to many other negative health indicators (poor housing, fuel poverty, unemployment, mental ill-health, educational underachievement, inadequate diet etc, etc)
Put very simply the more deprived the community you live and the less income you have, the shorter your life expectancy. Recent research has uncovered a clear link between government spending cuts and poor health.
The pandemic has brought this home to many who had previously not understood the connection.
Last summer the think tank Autonomy published a report which showed the extent to which the less well off were more exposed to infection. It found 3,200,000 were in jobs which were categorised as high risk in terms of infection. The average full-time pay across high risk occupations was £574 per week. (The median weekly earnings for full-time employees is £585). One million of these worker were paid what is categorised as poverty wages and 98% of them were women.
Poor housing is another factor. For the better off being confined to home is at worst an inconvenience, for many it was a treat. For those who live in poor, damp, inadequately heated homes with no gardens it’s an oppressive, unhealthy confinement.
And that’s before we get onto digital poverty whereby children from low income families are struggling to study online from home because their parents cannot afford the broadband connection or laptops or both.
The Universal Credit (UC) uplift which was introduced last March as a response to the pandemic provided an extra £1,040 a year to six million households. Just how vital that proved to be is only just beginning to emerge.
Overall household spending reduced during the pandemic, leading to an unprecedented rise in savings. This has led to misleading newspaper headlines suggesting we are all better off.
However this was not the experience for people on low incomes. Earlier this month the Resolution Foundation think tank published a paper called Pandemic Pressures which told a very different story.
Where people saved was on items such as holidays, commuting costs, meals out and leisure activities – most of this was discretionary spending of those with surplus cash. It follows that those with the highest incomes have tended to see spending fall and savings rise.
However the report finds that more than half of adults in families from the lowest income quintile have borrowed more to cover everyday costs since the pandemic began, while those that entered the crisis with low savings have been the most likely to have run those down during 2020.
It is people with dependent children who have suffered the most. There are three factor which have driven this.
Having children at home more has required higher spending on food, energy and ways to distract and entertain children when outdoor leisure activities have been impossible.
Remote schooling has proved very expensive for those families who have had to buy a laptop and or broadband access.
The cost of some items, food being just one example, as many have had to use local but more expensive shops or else pay for home delivery. Charity shops have also been harder to access.
Finally restrictions on non-essential trips have prevented a lot of family and community support and many important free services – libraries being an example, have been closed.
The financial worries all this has caused for many families has added to the general stress and anxiety of the pandemic, impacting their mental health. Remember that all this is despite the £20 a week increase.
There is no question that government measures taken over the past 12 months have had a massive impact in protecting jobs and the general state of the economy. The question now is what will happen during the course of this year as the crisis recedes and those schemes come to an end.
A second Resolution Foundation report The Living Standards Outlook has examined this. It concludes: “the combination of the withdrawal of the extra £20 on UC and WTC, which is still due to expire in April 2021, combined with the expected increase in unemployment of 900,000 in 2021-22 as the JRS comes to an end, means that typical non-pensioner household incomes are projected to fall by 0.4 per cent in 2021-22.”
The impact on the least well off is the most pronounced. “We project that incomes at the 10th and 20th percentile of the distribution will decline by around 10 per cent and 5 per cent respectively next year.”
Therefore those most impacted by the downturn are people who are already struggling just to get by. More and more will fall into both relative and absolute poverty.
Removing the increase will take £1,000 a year from six million households and putting the basic level of unemployment at its lowest in real terms since 1990-91.
The Resolution Foundation has calculated that this would also mean 33.7% of children would be in poverty by the end of the current Westminster parliament – 730,000 more than in 2020-21.
However if the £20 a week uplift were to be retained and indexed with inflation then relative poverty overall and inequality would both fall over this parliament, and child poverty would remain virtually flat.
The cost of doing this is significant: £6 billion per annum. But when you look at how that could be paid for it translates into 1p on income tax or 5p on fuel duty, surely not an unreasonable ask for the rest of us.
The issue that underpins all of us is whether we still want to have a welfare state. There used to be unanimity across the political spectrum on this. Yet in recent years the consensus has been eroded, the poor have been demonised and the cost of the banking crisis has been borne by those who had nothing to do with it.
That’s why civic society needs to insist that government grabs the opportunity to claw back some of the ground that has been lost. Now that we know more about the toll that poverty takes there really is no excuse.
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