Social security net is failing during the Covid-19 crisis

The Covid-19 pandemic has revealed our benefits system to be unfit for purpose. It now needs a radical transformation

The failings of the UK’s social security system have been exposed as workers whose income has been hit by the Covid-19 crisis have sought to rely on the safety net, and in many cases promptly fallen through its holes (writes TUC’s ANJUM KLAIR).

This is the result of years of deliberate attacks on the social security system, with around £34 billion of cuts made to social security since 2010.

Over a decade of austerity, including benefit caps and freezes, a punitive sanctions regime and the introduction of the five-week wait in universal credit, has pushed working families into debt and poverty.

What has the current crisis exposed?

Claimants seeking financial support since the start of the pandemic are now experiencing the inadequacy of benefit rates: if you become unemployed, the basic rate of universal credit is £94 a week. This is around a sixth of average weekly pay.  

The inability of the welfare system to cushion the financial fall for new claimants can be seen in the soaring demand on food banks during April: distribution of food parcels increased by 89 per cent compared to the same period in 2019 and for children there was a 107 per cent rise.

A survey on people’s experiences of the benefit system during the pandemic found 75 per cent of those claiming universal credit felt it would not stretch to cover their bills.

New universal credit claimants must wait five weeks for their first payment. Therefore, the system fails to support people when they are at their most vulnerable, and adds to the turbulence of their finances.

Advance loans are available, but these must be paid back out of future meagre benefit payments. People who have been reluctant to claim cite the fear of falling into debt.

Harsh and unfair rules

Callous rules have been introduced since 2010 to reduce eligibility and save money. 

The benefit cap limits the sums that can be received in social security payments, without reference to household need. Analysis by the Child Poverty Action group, predicts that up to 40,000 households are likely to be affected by the benefit cap as a result of the pandemic, the vast majority of whom will be families with children.

Introducing the two-child limit for social security also breaks the fundamental link between need and what a family receives. A quarter of a million households containing 911,000 children have been affected by the policy since its introduction. It is estimated that 60,000 families could be affected as a result of the Covid-19 crisis.

Harsh and unfair rules on conditionality and sanctions have been justified to motivate people to engage with job centre support and take active steps to move closer to work. However, the evidence of the effectiveness of this policy is limited.

The UK government has ended a three-month pause on the requirement for people receiving universal credit to prove that they are looking for work. However, the job market has shrunk dramatically, and as the job retention scheme winds up the challenges of finding work will be enormous.

The current crisis has highlighted the unfortunate situation of those living in the UK under the ‘No Recourse to Public Funds’ policy (NRPF), introduced in 2012. It is not right that those with the legal right to live and work in the UK and pay taxes are not entitled to access the vast proportion of social security needed in times of crisis.   

NRPF restrictions have pushed working families into poverty, forcing them into unsustainable debt and into homelessness or unsafe, overcrowded, insecure housing. Since the Covid-19 outbreak, their situation has worsened considerably; they have had to choose between their own health, public health, and the financial wellbeing of their household.

We need to transform and revitalise our safety net.

Many people need to rely on the social security system at some point in their lives. Illness and unemployment can strike anyone at any time, as the pandemic has shown. And when this happens we should be able to turn to social security to help us.

We urgently need a political commitment to protect the vulnerable.

The cost of adequately funding the social security budget is small compared to the cost of not acting, which includes both the deep social costs of inequality, and the impact of millions of families with less spending power.

Making our social security system fit for purpose requires fundamental changes, including scrapping universal credit.

The immediate priority, however, is for the government to devise an urgent plan to provide financial support and security to those who need it most.

Immediate steps to fix our social safety net

Universal credit and other benefits must be substantially reformed, by:

• Raising the basic level of universal credit and legacy benefits, including jobs seekers allowance and employment and support allowance, to at least 80 per cent of the national living wage (£260 per week).
• Ending the five-week wait for first payment of universal credit by converting emergency payment loans to grants.
• Removing the savings rules in universal credit, allowing more people to access it.
• Significantly increasing benefit payments to children and removing the two-child limit within universal credit and working tax credit.
• Ensuring no-one loses out on any increases in social security by removing the arbitrary benefit cap. In addition, no one on legacy benefits should lose the protection of the managed transition to universal credit as part of this change.
• The suspension on conditionality requirements for universal credit needs to remain.  

Sick pay must cover the basic costs of living

• Statutory sick pay must be sufficient to cover basic living costs. Weekly payments must rise from £95.85 to the equivalent of a week’s pay at the Real Living Wage – around £320 a week.
• The lower earnings limit for qualification for sick pay must be removed to ensure everyone can access it, no matter how much they earn.

Wider package of financial support for households

• The NPRF restrictions need to be removed permanently.  Everyone living in the UK must have access to public funds.
• Introduce a wider package of support for households, by increasing the hardship fund delivered by local authorities. A hardship fund should not just be there for the current crisis; government should put in place a fund that provides a permanent source of grants to support those facing hardship.