The UK workforce expanded in the three months to February, driven by young people leaving full-time education and moving into work, but the longer-term problem of rising ill-health continues to worsen, the Resolution Foundation said in response to the latest ONS labour market statistics yesterday.
The UK workforce continued to expand in recent months, with employment up 170,000 on the quarter, and economic inactivity down 230,000. The fall in inactivity was driven by full-time students: the number of people inactive due to being a full-time student was down 180,000 on the quarter.
The labour market has loosened overall, with short-term unemployment (up to 6 months) rising by 52,000 to above normal pre-pandemic levels, and vacancies falling by 47,000 on the quarter.
Less encouragingly, inactivity among older workers aged 50-64 remains high – up 298,000 on pre-pandemic levels – while the number of people inactive due to ill-health rose to a record high of over 2.5 million.
Reversing this trend – which predated the pandemic – is a huge priority that is likely to take years to address, says the Foundation, and a key test of the new Health and Disability White Paper.
Nominal pay growth strengthened in February, driven by the gap between public-sector (5.3 per cent) and private sector (6.1 per cent) pay growth closing. However, with inflation still at double digits, pay packets continue to shrink in real terms.
Louise Murphy, Economist at the Resolution Foundation, said:“Britain’s workforce continued to expand in early 2023 as thousands of full-time students moved into work. But while the young entered work, but the old and sick did not. Reversing these trends are a major problem for policy makers across government to confront.
“Strong growth in the public sector has helped to close the gap in pay growth with the private sector. But the picture remains that almost all workers across Britain are seeing their pay packets shrink in real terms, which will continue for the foreseeable future.”
Commenting on the Resolution Foundation’s Low Paid Britain Report, which criticises the UK’s lack of decent sick pay, TUC General Secretary Paul Nowak said: “Nobody should be plunged into financial hardship if they become sick.
“But Britain has one of the most miserly sick pay rates in Europe.
“This is disproportionately punishing low-paid workers and leaving them without a safety net.
“We must fix our broken sick pay system by making statutory sick pay available from day one and raising it to the level of the real living wage.
“The lack of decent sick pay cost us dear during the pandemic. The government should have learned this lesson.”
On the need for a higher minimum wage and sector-wide fair pay agreements, Paul Nowak added: “Let’s not kid ourselves. Low-paid workers remain under huge financial strain.
“Energy bills have shot up by £67 a month and food prices are through the roof.
“It’s time to put an end to low-pay Britain once and for all. That means getting the minimum wage to £15 per an hour as soon as possible.
“And it means introducing industry-wide fair pay agreements so that all workers have a minimum set of pay and rights.”
Our Living Wage Scotland team has had great success in encouraging 3,000 businesses in Scotland to become accredited Living Wage employers. Now the Living Wage Foundation is moving into a new area.
The Living Pension accreditation scheme was launched in Edinburgh on 21 March 2023. It is a voluntary savings target for employers and aims to help workers build up a pension pot that will provide enough income to meet basic everyday needs in retirement.
Research completed by the Resolution Foundation in 2022 showed that four in five workers, and 95% of low-paid workers, paying into defined contribution schemes are not saving at the level needed to reach an acceptable standard of living in retirement.
You can read more about Living Pensions here, and you can also sign up to a free webinar being hosted by the Living Wage Foundation on Tuesday 16 May 2023.
Blackhall Mosque – Sunday 29 January House O’Hill Rd, Edinburgh EH4 2AJ
Islamic Relief UK is partnering with community pillars including Blackhall Mosque, Crookston Community Group and Masjid Al Hikmah to distribute 500 essential food hampers and supermarket vouchers to vulnerable families.
The new year continues to see the cost of living crisis pushing families into poverty and Scotland has seen an alarming rise in food insecurity and the need for financial assistance, fuelling the need for food banks across the city.
Islamic Relief UK will continue to support the most affected through food banks, mosques and other organisations but are calling on the UK government to ensure people have adequate incomes to cover the essentials.
A new report by the Resolution Foundation finds that there are large increases in people unable to afford essentials compared to the pre-pandemic period. In November 2022, 28 per cent (up from 9 per cent pre-pandemic) of adults say that they could not afford to eat balanced meals, and 11 per cent or 6 million adults (up from 5 per cent pre-pandemic) reported being hungry in the past month but they didn’t eat as they lacked enough money to buy food.
These very alarming outcomes are more common among groups known to experience disadvantage. This includes low-income families, those suffering from domestic abuse, the homeless, asylum seekers and refugees who were already struggling to feed themselves.
Many families in Scotland have been hit hard by the pandemic and suffered a cold Winter of choosing whether to heat or eat.
To help some of the most vulnerable, hampers will be packed with essential food by staff and volunteers, before delivery to locations across the city and residents.
The food packs will contain essential items such as bread, pasta, tea, biscuits, oil, sugar and others.
Tufail Hussain, Director of Islamic Relief UK said:“Food banks are not a sustainable or dignified way to help people who are struggling to survive because they do not have a sufficient or reliable income. We will continue to support the most vulnerable through our programmes, but food banks should not exist in one of the wealthiest countries in the world.
“The current cost of living crisis has revealed just how much the UK’s benefits system is failing to support those on the lowest incomes. Only long-term structural change will give people the best chance of escaping poverty and living with dignity.
“The UK government must do more to deal with the immediate impacts of the cost of living crisis, but also undertake a fundamental review of the UK’s social security system with a view to ensuring benefits provide people with an adequate income to cover their essential needs.”
About Blackhall Mosque and Association of Scottish Muslims
Association of Scottish Muslims (formely CEPA) is a registered charity founded in 2001 by concerned Muslims from Edinburgh. Its purpose is to work with the Muslim community and statutory organisations to build an infrastructure to provide a range of services to promote the inclusion, the development and the welfare of Muslims, enabling them to become a responsible and thriving part of civic life.
Locations:
Masjid Al Hikmah – Saturday January 28 2023 11am – 4pm 31-33 St Clement Street, Aberdeen, AB11 5FU
In his Spring Statement, the Chancellor promised to support families through the cost of living crisis today, and to cut their taxes in the future. But his failure to deliver on both of these means that absolute poverty is expected to rise by 1.3 million people next year, while only one-in-eight workers will see actually see their tax bills fall by the end of the parliament, according to the Resolution Foundation’s overnight analysis of Spring Statement 2022 today.
Inflation Nation shows that faced with an unprecedented squeeze on family’s household finances and a significant boost to the public finances, the Chancellor opted for a big but poorly targeted policy package focused on partially offsetting some of the big tax rises he’d previously announced, rather than on supporting those families hit hardest by the cost of living crisis.
Key findings from the overnight analysis include:
Families face £1,100 income losses. The scale of the cost of living squeeze is such that typical working-age household incomes are to set to fall by 4 per cent in real-terms next year (2022-23), a loss of £1,100, while the largest falls will be among the poorest quarter of households where incomes are set to fall by 6 per cent.
Absolute poverty rises by 1.3 million. The scale and distribution of the cost of living squeeze, coupled with the lack of support for low-income families, means that a further 1.3 million people are set to fall into absolute poverty next year, including 500,000 children – the first time Britain has seen such a rise outside of recessions.
Tax rises for seven-in-eight workers. Considering all income tax changes to thresholds and rates announced by Rishi Sunak, only those earning between £49,100 and £50,300 will actually pay less income tax in 2024-25, and only those earning between £11,000 and £13,500 will pay less tax and National Insurance (NI). Of the 31 million people in work, around 27 million (seven-in-eight workers) will pay more in income tax and NI in 2024-25.
A £11,500 wage loss. With real wages in the midst of a third major fall in a little over a decade, average weekly earnings are on course to rise by just £18 a week between 2008 and 2027, compared to £240 a week had they continued on their pre-financial crisis path. This lost growth is equivalent to a £11,500 annual wage loss for the average worker.
A parliament of pain. Typical household incomes are forecast to fall by 2 per cent across the parliament as a whole (2019-20 to 2024-25), making this parliament the worst on record for living standards, beating the 1 per cent income fall over the course of the 2005-05 to 2010-11 parliament.
Rapid fiscal consolidation. The decision to bank much of the borrowing windfall set out by the OBR sees borrowing set to fall rapidly from 14.8 per cent of GDP in 2020-21 to 1.3 per cent of GDP in 2024-25 – lower than it was expected to reach pre-pandemic. This increases the Chancellor’s fiscal headroom at the end of the parliament from £18 billion to £28 billion, the equivalent of a further 4 to 5p cut in the basic rate of income tax.
Torsten Bell, Chief Executive of the Resolution Foundation, said:“In the face of a cost of living crisis that looks set to make this Parliament the worst on record for household incomes, the Chancellor came to the dispatch box yesterday promising support with the cost of living today, and tax cuts tomorrow. Significant measures were announced on both counts, but the policies do not measure up to the rhetoric.
“The decision not to target support at those hardest hit by rising prices will leave low-and-middle income households painfully exposed, with 1.3 million people, including half a million children, set to fall below the poverty line this coming year.
“And despite the eye-catching 1p cut to income tax, the reality is that the Chancellor’s tax changes mean that seven-in-eight workers will see their tax bills rise. Those tax rises mean the Chancellor is able to point to a swift fiscal consolidation and significant headroom against his fiscal rules.
“The big picture is that Rishi Sunak has prioritised rebuilding his tax-cutting credentials over supporting the low-to-middle income households who will be hardest hit from the surging cost of living, while also leaving himself fiscal flexibility in the years ahead. Whether that will be sustainable in the face of huge income falls to come remains to be seen.”
The Secretary of State for Levelling Up Michael Gove has written to the First Ministers of Scotland, Wales and Northern Ireland following the publication of the Levelling Up White Paper.
In the letters the Secretary of State for Levelling Up:
calls for the First Ministers of Scotland, Wales and Northern Ireland to work with the UK government to overcome shared challenges
The Scottish Government is yet to respond.
LEVELLING UP: REACTION
Responding to the publication of the levelling up white paper, TUC General Secretary Frances O’Grady said: “If we don’t level up at work, we won’t level up the country.
“But the government has failed to provide a serious plan to deliver decent well-paid jobs, in the parts of the UK that need them most.
“Insecure work and low pay are rife in modern Britain. And for far too many families hard work no longer pays.
“With the country facing a cost-of-living crisis, working families need action now to improve jobs and boost pay packets – especially after more than a decade of lost pay.
“Ministers should have announced a plan to get real wages rising – starting with a proper pay rise for all our key workers and the introduction of fair pay deals for low-paid industries.
“And they should have delivered the long-awaited employment bill to ban zero hours contracts – as well as new, meaningful investment in skills and good green jobs of the future.
“Without a plan to deliver decent work up and down the country, millions will struggle on, on low wages, and with poor health and prospects.”
Recent polling published by the TUC found the British public’s number one priority for levelling up is more and better jobs.
The TUC polling, conducted by YouGov, reveals that the most popular priority for levelling up, chosen by one in two Britons, is increasing the number and quality of jobs available.
Increasing the number and quality of jobs is popular across the political spectrum. Half (49 per cent) of those who voted Conservative in the 2019 general election picked it as their top priority, along with more than half of Labour voters (56 per cent) and Lib Dem voters (54 per cent).
Matthew Fell, CBI Chief Policy Director, said:“The Levelling Up White Paper is a serious assessment of the regional inequalities which have hamstrung the UK’s economic potential for generations.
“It offers a blueprint for how government can be rewired and an encouraging basis for how the private sector can bring the investment and innovation to start overcoming those deep-rooted challenges, and power long term prosperity for every community, wherever they live.
“The picture it paints of a reinvigorated 2030 UK can inspire public and private sector partners to unite on shared missions for improving health, wealth, growth and opportunity across the country.
“Crucially, it accepts the CBI view that business-driven economic clusters – enabling every region and nation to build its own unique competitiveness proposition – can be a catalyst which brings levelling up ambitions to life.”
University of Birmingham’s John Bryson on the Levelling Up announcement: “The UK has always suffered from uneven development and this is reflected in all measures of well-being – from salaries to place-based differences in mortality rates and morbidity.
“There is no country on this planet that does not suffer from some form of uneven place-based outcomes. The implication is that any attempt to remove place-based uneven outcomes will and must fail. The policy outcome might mean some alteration in the extent or degree of unevenness, but unevenness will continue to persist.
“No political party will be able to develop effective solutions to create a level playing field. Nevertheless, this does not mean that policies should not be designed to support and facilitate some form of more even development. However, the outcome will still be the persistence of uneven outcomes.
“The key to any levelling-up agenda is to accept that every place is different and that there are multiple alternative place-based pathways; London can never become Newcastle and Newcastle can never become London.
“The levelling-up agenda needs to be positioned around a debate that is not based on closing the gap between the richer and poorer part of the country, but instead must be framed around facilitating place-based responsible inclusive prosperity.
“This must be the focus as any policy targeted at economic growth can never be sustainable. The levelling-up policy initiative ultimately must be designed to encourage inclusive carbon-light lifestyles. One implication is that levelling-up might also require some degree of levelling-down.”
Campbell Robb, Nacro chief executive said: “We know tackling poverty and inequality is key to levelling up. For over 50 years Nacro has been embedded in communities helping some of our nation’s most vulnerable people through our housing, education, and justice services.
“We see a huge amount of unmet need in our country. We need radical change to the systems that support people and significant funding to address this need, not just ambitions and slogans.
“Until there is right support, opportunity, and funding in place for everyone to succeed regardless of the circumstances, we cannot truly claim to be levelling up”
Torsten Bell, Chief Executive of the Resolution Foundation, said: “We now know what levelling up is – George Osborne plus New Labour.
“The White Paper is all about combining the devolution of the former Conservative Chancellor, with the bigger and more activist state focused on deprived areas of the last Labour government.
“There is a strong case for both. Whether they can be delivered very much remains to be seen.”
Responding to the publication of Government’s Levelling Up the United Kingdom White Paper, Social Mobility Commission Chair Katharine Birbalsingh and Deputy Chair Alun Francis said:“We welcome the publication of the Levelling Up White Paper, and the fact that it gives a clear framework to address disparities between regions and communities.
“These communities are full of talented individuals and we must do everything we can to empower them to thrive. Each of the missions the paper sets out are hugely important, and it is crucial that checks and balances are in place to ensure that local government bodies, both existing and new, are held to account for their delivery.
“The Commission has been clear that social mobility must be a core objective of levelling up. We are pleased to see that equipping young people with the tools they need to succeed in life is at the heart of this strategy, and that it includes measures that can contribute to social mobility through every stage of a young person’s journey, from early childhood through education, training and employment.
“The missions are aspirational and pose the right questions, but are also hugely ambitious. The test will be in the detail and the implementation – not just boosting skills, but which skills will be taught and how; not just aiming for essential literacy and numeracy, but defining the most effective ways to achieve them.
“Ultimately, levelling up will be judged on how well it creates opportunities in places they did not exist before. A key test will be how we help those with the fewest opportunities find decent work – this is not just about stories of rags-to-riches. More still needs to be done to stimulate the creation of much-needed quality private sector jobs in the most deprived areas.
“As the Social Mobility Commission we stand ready to work with the government to flesh out that detail, advise on the best ways to make these missions a reality, and ensure that levelling up empowers people up and down the country to stand on their own two feet.”
Finally, after months of delays, the levelling up White Paper is out! So was it worth the wait?
Levelling Up White Paper leaves low paid workers behind
As the TUC has argued, you can’t level up without levelling up at work. In-work poverty, driven by the prevalence of low-paid and insecure work, is sky-high in every region and nation of the UK. This reflects the fact that low-paid sectors, such as retail and social care, are major employers in every area of the country (writes TUC’s JANET WILLIAMSON).
And more and better jobs is the public’s top priority for levelling up, with recent polling for the TUC conducted by YouGov finding that increasing the number and quality of jobs is seen as a priority for levelling up by one in two people from right across the political spectrum. Does the White Paper deliver this?
The White Paper sets out 12 missions – or aims – spanning living standards, R&D, transport, digital connectivity, education, skills, health, well-being, pride in place, housing, crime and local leadership. There is not a specific mission on work, but the living standards mission is “By 2030, pay, employment and productivity will have risen in every area of the UK, with each containing a globally competitive city, and the gap between the top performing and other areas closing.”
So, what is the plan for achieving this?
In a nutshell, it is to grow the private sector and improve its ability to create new and better paid jobs. There are five strategies to support this aim, all of which fall under a typical ‘industrial strategy’ umbrella: improving SME’s access to finance; boosting institutional investment, including from the Local Government Pension Scheme (LGPS) and the recently established National Infrastructure Bank; attracting foreign direct investment and using trade policy, in particular freeports, to boost investment; improving the diffusion of technologies and innovation; and supporting and growing the manufacturing sector.
There are some important questions to be answered in relation to some of these strategies; for example, it is vital that the LGPS is invested in the long-term interests of its members, without its funds being diverted towards other purposes. And each deserves proper examination in its own right.
But what they have in common is that all of them aim to create a better distribution of well-paid and highly skilled jobs around the country. This is needed – but what about the jobs that people are already in? There is no plan to address inequality within the labour market and nothing to level up work that is low paid and insecure.
The experience of London shows that the prevalence of high-paid jobs does not automatically lead to rising incomes for the wider community. Indeed, London has the highest rate of in-work poverty in the country, with people in low-paying service sector jobs priced out of housing and local amenities.
To level up, we must tackle low pay and insecurity head on, and focus on those sectors that need it most.
We need to strengthen the floor of employment protection for all workers by raising the minimum wage and tackling zero hours contracts. And the government should lead by example, giving public sector workers a proper pay rise and reversing the devastating cuts that public services have suffered in the last decade. Decent jobs should be a requirement of all government procurement, so that the power of government is used to drive up employment standards.
But we also need to change the way our economy works to hardwire decent work into business models and economic growth. Relying on the private sector to level up without changing how it works will fail. We need corporate governance reform to rebalance corporate priorities and give working people a fair share of the wealth they create. And we need a new skills settlement to give working people access to lifelong learning accounts and a right to retrain.
Levelling up at work means addressing the imbalance of power in the workplace
Working people need stronger rights to organise collectively in unions and bargain with their employer. Collective bargaining promotes higher pay, better training, safer and more flexible workplaces and greater equality – exactly what we need to level up at work. Unions should have access to workplaces to tell people about the benefits of unions, following the New Zealand model.
And to level up we must tackle entrenched low pay and poor conditions within sectors head on, bringing unions and employers together to set sectoral Fair Pay Agreements for low paid sectors, starting with social care.
Creating new and better jobs is important; but this Levelling Up White Paper has left those in low paid, insecure work behind.
The number of households suffering from ‘fuel stress’ – spending at least 10 per cent of their family budgets on energy bills – is set to treble overnight to 6.3 million households when the new energy price cap comes into effect on April 1, according to new research published today by the Resolution Foundation.
The research shows that the proportion of English households in ‘fuel stress’ – a general indicator of finding energy bills unaffordable and also the definition of fuel poverty in Wales, Scotland and Northern Ireland – is currently 9 per cent.
It is expected to leap to 27 per cent as a result of the energy price cap rising by more than 50 per cent this April to around £2,000 per year. Ofgem will announce the new price cap level on February 7.
Levels of fuel stress are set to be highest in the North East and the West Midlands (33 and 32 per cent), among pensioner households (38 per cent), among those in local authority housing (35 per cent) and among those in poorly insulated homes (69 per cent of families in homes with an EPC F-rating).
The sheer scale of energy bill increases mean that fuel stress will no longer be confined to the poorest households, says the Foundation, but low- and middle-income families will find it hardest to cope as they spend a far greater share of their family budgets on these essentials.
The report notes that the Government is rightly considering ways to mitigate rising energy bills, and should target support at lower income households.
The Foundation says that the most effective way to support lower-income families is through the benefits system, with a faster-than-currently-planned uprating of benefits in April (benefits are set to rise by 3.1 per cent).
Alternatively, an additional payment based on the Warm Homes Discount (WHD) could be pursued. However, the policy will require major surgery in order to make it for purpose. The reforms should include making the WHD:
Bigger, by increasing the £140 payment by at least £300;
Broader, by widening eligibility to all families in receipt of pension credit or working age benefits (8.5 million families in total) and making payments automatic;
Timelier, the extra support should be delivered via an additional bill discount this spring, following the normal winter round; and,
Taxpayer funded, by funding the payments through general taxation (at a cost of £2.5 billion) rather than through further increases in everyone else’s energy bills.
A new vastly improved WHD would cut the number of households living in fuel stress by around five percentage points – equivalent to over one million families.
The report adds that the Government may also want to take action to cut everyone else’s energy bills too.
This could be achieved by spreading the costs of energy firm failure over a number of years (reducing bills by up to £65) and temporarily transferring the social and environmental levies needed to future-proof Britain’s energy supply from bills to general taxation.
This would cut everyone’s energy bills by around £245 and would cut the number of families in ‘fuel stress’ by over seven percentage points – or 1.7 million families – but at a cost of £4.8 billion.
In combination, this dual approach of providing support to all energy bill payers, alongside targeted support for those most at risk of falling into ‘fuel stress’ would reduce energy bills by up to £545 a year – at a cost of around £7.3 billion – and help to avert a cost of living catastrophe this year. The rise in fuel stress would be reduced by two thirds, with 2.7 million fewer families in fuel stress.
Finally, while short term measures are clearly needed, the medium- and long-term solution to energy price shocks is reform of our energy market, better insulating our homes, and reducing our dependence on natural gas via an accelerated move to heat pumps, and the rollout of renewable and nuclear electricity.
Jonny Marshall, Senior Economist at the Resolution Foundation, said:“Rising gas prices are causing energy bills to soar, and will see the number of families suffering from ‘fuel stress’ to treble to more than six million households this summer.
“Fuel stress levels are particularly high among pensioner households, and those in poorly insulated homes – a stark reminder of the need to modernise Britain’s leaky housing stock and curb national dependency on gas for power and heating.
“The Government can take action by targeting support at lower income households via benefits or a bigger and broader version of the Warm Homes Discount. They should also temporarily transfer the cost of environmental levies onto general taxation, as well as spreading the cost of supplier failure over three years.
“While not cheap at £7.3 billion, this plan is affordable, and by cutting bills by up to £545 would help prevent the upcoming rise in energy bills turning into a cost of living catastrophe for millions of families.”
2022 is set to the ‘year of the squeeze’, with real wages set to be no higher next Christmas than today, and families face a typical income hit of around £1,200 a year from April as a result of tax rises and soaring energy bills, according to new Resolution Foundation research published today.
The Foundation’s latest quarterly Labour Market Outlook looks ahead to how workers and families will be affected by the big economic shifts in 2022.
It notes that while Omicron is rightly at the forefront of people’s minds at present, it is unlikely to be the defining economic feature of next year as the wave is expected to be relatively short-lived.
Instead, 2022 will be defined as the ‘year of the squeeze’ for family budgets, with inflation set to peak at 6 per cent in Spring 2022 (its highest level since 1992) and pay packets stagnating as a result.
The report notes that real wage growth was flat in October, almost certainly started falling last month, and is unlikely to start growing again until the final quarter of 2022. As a result, real wages are on course to be just 0.1 per cent higher at the end of 2022 than at the start.
By the end of 2024, real wages are set to be £740 a year lower than had the UK’s (already sluggish) pre-pandemic pay growth continued. This shows just how much the Covid-19 crisis has scarred pay packets across Britain, says the Foundation.
The peak of the squeeze will come in April, says the report, which risks being a cost of living catastrophe as energy bills and taxes rise steeply overnight.
The cap on energy bills is expected to rise by around £500 a year. Coupled with a further £100 rise to recoup the costs associated with energy firm failures, this could mean a typical energy bill rising by around £600 a year.
This rise will fall disproportionately on low-income families as they spend far more of their income on energy. The share of income spent on energy bills among the poorest households is set to rise from 8.5 to 12 per cent – three times as high as the share spent by the richest households.
Higher-income families will instead by disproportionately affected by rising tax bills in April. The average combined impact of the freeze to income tax thresholds and the 1.25 per cent increase in personal National Insurance contributions is £600 per household. For families in the top half of the income distribution, the NI rise alone will raise tax bills by £750 on average.
The Foundation says the scale of this April cost of living catastrophe, at a time of falling real wages, means the government is likely to have to act.
While there is little the Chancellor can do in the short-term to tame inflation or boost wage growth, the welcome 6.6 per cent rise in the National Living Wage next April should protect the lowest earners from shrinking pay packets.
The top priority for further action should be tackling rising energy bills, says the Foundation. Options for doing so include:
Reducing the size of the energy cap rise directly. Compensating energy suppliers for a six month, £200 reduction would cost around £2.7 billion, or £450 million if focused on lower-income households on Universal Credit.
Extending the time period over which the costs of supplier failures are recouped, with the £100 bill rise reflecting a policy of recouping costs over a single year.
Moving environmental and social levies currently added to electricity bills into general taxation, saving households £160 per year and costing up £4.5 billion per year.
Extending and increasing the Warm Homes Discount.
Torsten Bell, Chief Executive of the Resolution Foundation, said:“2022 will begin with Omicron at the forefront of everyone’s minds. But while the economic impact of this new wave is uncertain, it should at least be short-lived. Instead, 2022 will be defined as the ‘year of the squeeze’.
“The overall picture is likely to be one of prices surging and pay packets stagnating. In fact, real wages have already started falling, and are set to go into next Christmas barely higher than they are now.
“The peak of the squeeze will be in April, as families face a £1,200 income hit from soaring energy bills and tax rises. So large is this overnight cost of living catastrophe that it’s hard to see how the Government avoids stepping in.
“Top of the Government’s New Year resolutions should be addressing April’s energy bills hike, particularly for the poorest households who will be hardest hit by rising gas and electricity bills.”
Over three-in-ten people who have started claiming Universal Credit (UC) during the pandemic have either acquired new debts, or seen their existing debts grow, as the crisis enters its eleventh month, according to new research published by the Resolution Foundation.
The debts that divide us – which includes analysis of a detailed online YouGov survey, supported by the Health Foundation – explores how people who have newly claimed UC during the pandemic have coped financially, as well as their prospects for the coming months.
The Foundation notes that of the almost six million people who are currently claiming UC, around three-in-five made a new claim in 2020, including many of the 1.4 million people who made a new claim at the start of the crisis in April and May of last year.
The research finds that families newly claiming UC have taken a major income hit, even with the vital £20 a week uplift to UC. Almost half (45 per cent) reported seeing their income fall by at least a quarter, while around one-in-three (34 per cent) reported seeing their income fall by at least 40 per cent.
And with the pandemic-induced economic crisis having lasted almost a year, the research shows that the big income losses faced by people moving onto UC are taking their toll on their ability to cope financially.
The research finds that over three-in-ten (31 per cent) new UC families have either acquired new debts or seen their existing debts grow, while around one-in-five (21 per cent) have fallen behind on paying essential (non-housing) bills.
Looking ahead to the next three months, a period in which UC is set to be cut by £20 a week (from 5 April 2021), three-in-five (61 per cent) UC families say they will struggle to keep up or will fall behind on bills, around twice the proportion of families across the economy as a whole (31 per cent).
The Foundation says that the uplift to UC has been essential for protecting family incomes during a pandemic that is lasting far longer than anyone expected when the policy was announced back in March 2020. The uplift is likely to prove just as vital in the coming months too, as more people claim UC off the back of rising unemployment.
It adds that with millions of households claiming UC experiencing real financial hardship, cutting their support in just two months’ time would be a grave error – and extinguish any hopes of a living standards recovery this year.
Karl Handscomb, Senior Economist at the Resolution Foundation, said:“Over three million people have started claiming Universal Credit since the pandemic began, including 1.4 million people who moved onto the benefit right at the start of the crisis.
“As the pandemic reaches its eleventh month – a depressing duration few expected last March – the income shock from with moving onto Universal Credit has evolved into mounting debts and arrears on essential bills.
“The Chancellor was right to raise Universal Credit to support families through tough economic times. And with tough times set to continue as unemployment rises through 2021, this vital boost to family incomes must be maintained.
“Cutting the incomes of six million families in just two months’ time, when public health restrictions are still likely to be widespread, makes no sense politically, economically, or in terms of raising people’s living standards.”
The extra cost of food, energy, and entertaining, distracting and home-schooling children has meant that low-income families with children are twice as likely to have increased, rather than reduced, their spending during the pandemic so far, according to new research.
Pandemic Pressures – a collaboration between the Resolution Foundation and the Nuffield Foundation-funded Covid Realities research project at the University of York – combines survey work with first-hand accounts of low-income parents and carers to highlight how the spending patterns of low-income families with children have been very different to the wider population during the pandemic, and during the first lockdown in particular.
The report notes that the pandemic has been marked by a huge reduction in overall spending as social activities have been curtailed by public health restrictions.
However, this ‘enforced saving’ has affected higher income households more, as they spend 40 per cent more of their income on recreation, leisure and hospitality activities than the poorest fifth of households (24 per cent vs. 17 per cent).
In stark contrast to this overall picture, the research shows that the pandemic has in many cases made it more expensive to live on a low income with children – and particularly so during lockdowns.
Over-one-in-three (36 per cent) low-income households with children have increased their spending during the pandemic so far (rising to 37 per cent during the first lockdown), compared to around one-in-six (18 per cent) who have reduced their spending. Among high-income households without children, 13 per cent have increased their spending, compared to 40 per cent who have reduced it.
The report highlights three main reasons for these extra pandemic pressures.
First, parents identified that having children at home 24 hours a day led to higher food and energy bills, while the need to entertain them during the lockdowns, in place of activities such as visiting families and public libraries, has brought additional costs.
Second, parents identified additional costs associated with home-schooling, such as acquiring laptops, paying for internet access and obtaining additional study materials.
Third, families noted that the cost of buying food had risen, due to the reduction in store promotions, and because the need to shield has forced many to use more expensive home delivery options, while the need to avoid public transport means those without access to a car have had to use more expensive shops closer to home.
The report notes that these spending pressures for low-income families have come off the back of living standards that have stagnated pre-pandemic. Real incomes for the lowest-income households were no higher in 2018-19 than in 2001-02.
With the third national lockdown likely to last several months and put families under further pressure, the report calls on the Chancellor to urgently do more to support family incomes during the pandemic.
The top priority should be to maintain the £20 a week uplift to Universal Credit (UC) into next year – otherwise six million households face having their incomes cut by over £1,000. The report authors add that the Chancellor should also strengthen the safety net for families with children in light of the extra cost pressures they face.
Mike Brewer, Chief Economist at the Resolution Foundation, said:“The pandemic has forced society as a whole to spend less and save more. But these broad spending patterns don’t hold true for everyone.
“The extra cost of feeding, schooling and entertaining children 24/7 means that, for many families, lockdowns have made life more expensive to live on a low income.
“With the country going into another lockdown for at least the next few months, the Chancellor should acknowledge the pandemic pressures that families with children face and reconsider plans to cut Universal Credit in just a few months’ time.”
Dr Ruth Patrick, Lecturer in Social Policy at the University of York, who leads the Covid Realities research programme said:“The idea of being able save money during this pandemic is just a world away from the experiences of the parents and carers we’ve been working with through the Covid Realities research project.
“Parents have found their spending increase, as some of the usual strategies they use to get by on a low income – shopping around for the best deal, going to families and friends for a meal when the cupboards are empty – have become suddenly impossible.
“The conditions the pandemic has created make it harder still to get by on a low-income, creating extra financial pressures, rooted in the requirement for families and their children to stay at home and restrictions on household mixing.
“While the need for the lockdown is clear, there is an equally urgent need to address the additional financial pressures that families on a low-income face through greater income support to families with dependent children.”
The Government should use the Job Retention Scheme (JRS) to encourage more workers to self-isolate at home – a key part of the strategy to fight Covid-19 that the current sick pay regime is failing to support – according to new research published by the Resolution Foundation.
The report – Time Out – explores the eligibility, generosity and efficacy of the UK’s statutory sick pay regime and Test and Trace payments during the Covid-19 crisis, and considers the case for reform.
It concludes that with self-isolating continuing to play a crucial role in fighting Covid-19 throughout 2021 as the vaccine is rolled-out, and with the Head of Test and Trace Dido Harding admitting that financial difficulty means some people are refusing to self-isolate, the current system needs to be replaced with a more effective regime.
The report notes that the main support available for employees asked to self-isolate at home is Statutory Sick Pay (SSP). But at just £96 a week, SSP offers the lowest level of Government support provided across any advanced economy during the pandemic. SSP replaces less than a quarter of a typical employee’s previous earnings, compared to an OECD average replacement rate of 60 per cent.
Furthermore, two million employees earning less than £120 a week are not eligible for SSP – a barrier that excludes one-in-four part-time workers, and one-in-seven workers in retail, hospitality and leisure – leaving them with no income at all if they self-isolate at home.
The UK Government has implicitly acknowledged the limitations of SSP by introducing £500 Test and Trace Support Payments (TTSP) for individuals entitled to benefits.
However, the report finds that these more generous payments are not reaching enough people, with only one-in-eight workers entitled to them. For example, data supplied by local authorities across West Yorkshire – an area which has had one of the highest infection rates in the UK over recent months – showed that just 1,783 payments have been made between 12 October and 25 November.
With financial support for self-isolating at home playing a critical role in helping to bring Covid infections down, the report calls for a more effective, generous and easy to deliver support regime to be put in place – using the JRS, Self-Employment Income Support Scheme (SEISS) and Employment and Support Allowance (ESA).
The Foundation proposes the following support:
Employees to be paid via the JRS. Extending the JRS to include self-isolation payments would ensure workers retained 80 per cent of their previous earnings. The Foundation estimates this would cost £426 million a month (up from around £112 million which is spent on SSP) if 643,000 employees used the scheme.
Self-employed workers to be paid pro-rata via the SEISS. Grants of up £830 should be awarded to self-employed workers who need to self-isolate for ten days, if they haven’t already claimed.
Self-employed workers not entitled to SEISS to be paid via enhanced ESA. The many self-employed workers not eligible for the SEISS are entitled to ESA. This payment should be uprated by £20 to £96 a week – in line with the uprating of Universal Credit – while people are asked to self-isolate.
The Foundation adds that while the following package of measures would help to get Covid infections down, the failure of the UK’s sick pay regime should not be forgotten once the pandemic has passed. Permanent reforms to both its eligibility, generosity and operation will be needed, it says.
Maja Gustafsson, Researcher at the Resolution Foundation, said:“Getting people to self-isolate at home is one of the important tools we have in combatting Covid-19. But asking workers to do that often involves a major financial sacrifice – and the UK’s sick pay regime has been woefully inadequate in providing the necessary support. Many more Covid infections will have taken place as a result.
“Coronavirus vaccines will take many months to roll out, so more workers will need to self-isolate at home to contain the spread of the virus next year. Given the failure of the current sick pay regime, the Government must turn now to the far more successful job support schemes to provide workers and firms with the financial support they need to do the right thing.”
TUC general secretary Frances O’Grady commented: “The lack of decent sick pay has been a gaping hole in the government’s Covid strategy. Asking workers to self-isolate on £96 a week is not viable – especially when many don’t have savings to fall back on.”
She warned: “This problem needs fixing urgently. Until people are given sick pay they can survive on they will be forced to choose between following the health advice and paying their bills. Nobody should be plunged into financial hardship for doing the right thing.
“Sick pay should be raised to at least the rate of the real living wage and everyone should be entitled to it. It’s not right that two million workers are excluded from it because they do not earn enough.”
TUC polling published in September revealed that more than 4 in 10 workers would be plunged into financial hardship if forced to self-isolate for two weeks on SSP.
