After a decade of deprivation, we need policies that prioritise recovery for families in poverty

@JRF_uk’s annual report on poverty in the UK 

A new flagship report finds that families in poverty start 2021 reeling from a triple financial blow:

• Before coronavirus, incomes were falling – and falling fastest – for people with the lowest incomes, as the value of benefit payments decreased, meaning millions were financially exposed when the pandemic hit
• People already trapped in poverty were worst affected by the economic storm caused by COVID-19, as they were more likely to be working in the hardest hit sectors
• Unless the Government makes the right decisions now, there is a risk that families in poverty find it much harder to recover from the third economic shock of a necessary but long third lockdown as the UK looks to rebuild its economy

In today’s state of the nation report, the Joseph Rowntree Foundation warns that ministers must make tackling poverty an economic priority in 2021 or they risk being defined by a record of worsening hardship.

The third lockdown has rightly prioritised saving lives, as no life that is lost can be rebuilt. For families in poverty this has been a year of relentless pressure simply to stay afloat. Trying to work, care for children and stay healthy during a third lockdown will push many to the brink when they have few resources left.

Throughout the pandemic, many steps have been taken to support families, but often at the eleventh hour, adding the pressure of uncertainty in a highly stressful time. It’s essential that the Government’s actions to rebuild the economy after the pandemic recognise and prioritise those who have borne the brunt of this crisis, and offers the skills and opportunities needed to build resilience and escape poverty. This means committing now to a good jobs recovery that brings opportunity and decent living standards to every part of the UK and turns back the tide of in-work poverty.

In April 2020, the Government rightly increased Universal Credit by £20 a week to help ease the pressure and support people who were already trapped in poverty before the pandemic, and those newly struggling due to recent job losses.

The Government must do the right thing and as a first step confirm that the uplift in Universal Credit will be made permanent and extended to people receiving legacy benefits. There is strong public support for this policy choice, and as the Government charts a new course in 2021 it has an opportunity to align with the public’s values on this key public service.

Pre-pandemic: Falling incomes for Britain’s worst-off families

Even before the pandemic the standard of living was falling fastest for people on the lowest incomes. Little progress had been made on poverty, and child poverty had been steadily rising. This rise was predominantly driven by the benefits freeze between 2016 and 2020 which meant support did not keep up with the cost of living.

Key findings:

• There has been a consistent rise in poverty among working people in recent years with almost a quarter (23%) of workers in the lowest paid sectors of retail, and accommodation and food living in poverty in 2018/19 – more likely to be women, young people and from ethnic minorities.
• While hourly pay has risen since 2014 because of increases in the minimum wage, lower-paid employees were offered fewer hours and little chance to progress at work.
• A third (35%) of Bangladeshi and Pakistani workers were in poverty in 2018/19 – around three times the rate for White workers (12%).
• More than a third (37%) of private renters were living in poverty, with the proportion of households renting privately almost doubling in the last 20 years from 10% to 19% of all households.

Pandemic hits: the disproportionate impact of Covid-19 on people trapped in poverty

People who were already trapped in poverty were particularly vulnerable to the financial shock caused by the pandemic due to their work being precarious or in sectors most affected by ongoing restrictions.

Key findings:

• Workers on the lowest incomes experienced on average the largest cut in hours at the start of the pandemic. 81% of people working in retail and accommodation saw their income drop.
• 4 in 10 workers on the minimum wage face a high or very high risk of losing their jobs compared to 1% of workers earning more than £41,500
• More than a third of single parents working in hospitality and over a quarter of those in retail were already living in poverty before their sectors were severely hit by restrictions.
• Workers from Black and minority ethnic backgrounds face the injustice of being 14% more likely to be made unemployed and 13% less likely to be furloughed. Evidence from the previous recession showed Bangladeshi and Pakistani workers were among those most likely to lose their jobs. This needs to be avoided in any coming wave of unemployment.
• It is deeply concerning that 45% of disabled people who were in employment at the start of the year reported no earnings by the middle of the year.
• 35% of private renters and 42% of social renters were also working in the sectors hit hardest by COVID-19. One in three were furloughed. 30% of private renters were worried about paying their rent through the winter. According to polling in October across both the private and social rented sectors, 700,000 were already in arrears with their rent in the autumn^[1].

Post-pandemic: those on the lowest incomes need urgent support to recover from lockdowns and job losses

UK Poverty 2020 – 2021 shows how the first lockdown in 2020 impacted families in poverty the hardest (as they faced increased living costs due to children being off school, lost work and built up extra debts). Those same families are now facing the latest lockdown in the heart of winter. Keeping children fed, warm and online for the weeks ahead will only increase the pressure on families as we all wait for the vaccine to roll out and the country to open up again.

Melanie, a former HR consultant living in Surrey, has been part of JRF’s UK Poverty Grassroots Action Group. She says:

“Since I was made redundant in the financial crash I have been working whenever I can and I set up a new business in 2018, but the work dried up during the first lockdown and we had to close. I have been caring for my 88-year-old father as well as bringing up my son and I haven’t been working since October. The job situation is pretty bleak. I’m at a loss about what to do next. I have tried so many things to better myself. I consider myself quite a strong, educated and confident person, and I know I have so much to offer. 

“I know this lockdown is necessary but it’s also another thing to battle through after all the struggles of the last year, and I want the system to work much better for people in my position once we get through this. One thing that has helped a little is the temporary £20-a-week uplift in Universal Credit. That extra £20 gave me a little bit more wiggle room, we’ve relied more on corner shops because they had the stock (in the first lockdown) – they were a lifeline when the supermarkets were running out. But my £50 weekly shop went up to about £80. All the offers and discounts stopped – the £20 didn’t go that far but it did make a difference. I always needed that extra money to get me through.” 

Responding to the Joseph Rowntree Foundation’s report on poverty across the UK, which reveals that it has risen considerably during the pandemic, Cllr Richard Watts, Chairman of the Local Government Association’s Resources Board, said:

“This report shows the worrying impact that COVID-19 has had on some of the most vulnerable in our communities and has pushed more people on low incomes into poverty.

“Support for children on free school meals and the uplift in Universal Credit have helped to protect many families most at risk, and it is important that these continue. As many households are likely to be economically vulnerable for some time to come, it is vital that the Government restores local welfare funding so councils can provide support to families who need it. 

“Councils want to help the circumstances of all their residents, regardless of their background or where they live. To help, they need long-term sustainable funding to do more planned preventative work to address underlying causes of hardship and disadvantage, and provide support to all households who need it. 

“This includes full funding for family support services, the ability for councils to resume their historic role as major builders of affordable homes and to be able to make the best use of employment and skills provision.”    

Helen Barnard, Director of the Joseph Rowntree Foundation said:

“It is a damning indictment of our society that those with the least have suffered the most before the pandemic and are now being hit hardest once again by the pandemic. The Government must now make the right decisions to avoid another damaging decade.

“It’s unacceptable that certain groups are bearing the brunt of the economic impact of COVID-19, and are now reeling from the latest blow of this third lockdown. We all believe in justice and in looking out for each other, and we support policies that reflect these values. Ministers were right to increase Universal Credit by £20 a week and they must now make it permanent and extend this support to legacy benefits.

“2020 was an extraordinarily difficult year for all of us and has shifted the dial in terms of what support is possible. Learning from this, there are serious injustices we cannot put off tackling any longer. We must not rest until everyone, regardless of their background, is able to achieve a decent life.”

“Our previous report on how Brexit could affect poverty in the UK found that the parts of the country that are already locked out of prosperity, including areas in Northern England, the Midlands, Wales and Northern Ireland, are more exposed to the impacts of non-tariff trade barriers and potential disruption in trade with the EU.  Jobs and earnings could be disproportionately affected in these areas, many of which had high levels of poverty and unemployment before the pandemic and hit hard by its economic impacts.  

“The UK government must protect people and places in poverty from the impacts of any disruption following Brexit and ensure that any new opportunities post-Brexit bring tangible gains for those people who have been shut out of prosperity for many years.”

Ten urgent actions government must take to keep people afloat in lockdown

JRF has set out ten actions the Government should take to offer support for people in poverty in this third lockdown: 

1. Keep the Lifeline

By committing to make permanent the £20 uplift to Universal Credit and Working Tax Credits and extending it to legacy benefits rather than going ahead with the planned cut in April. This would stop over 6 million of our worst-off families having their annual household budgets slashed by £1,040 overnight.

2. Ensure Universal Credit rules reflect the challenges of a national lockdown

By suspending repayments of advances and other benefit deductions. Work search and availability requirements should also once again be suspended. These measures would help to maximise household budgets and reduce the stresses and strains on people told to look for work when many firms have closed their doors.

3. Ensure renters can remain in their homes

By extending the ban on evictions and protections for renters, due to end on 11 January in England and 22 January in Scotland, for the duration of any lockdown measures. An extension until the end of March has already been granted in Scotland. This will help to prevent a wave of homelessness this winter and hold renters who have fallen into arrears steady. The Government should also introduce a targeted package of support to address rent arrears. JRF research found that around 2.5 million households are worried about how they will pay their rent over the winter months and 700,000 households are already in rental arrears. Direct immediate support could be delivered by boosting funding for Discretionary Housing Payments in England.

4. Provide emergency accommodation for rough sleepers

By restarting the ‘Everyone In’ scheme in England, and an equivalent in Scotland, Wales and Northern Ireland. Governments should reinstate the same level of protection given to homeless people during the first national lockdown when councils were directed and funded to find emergency accommodation for all rough sleepers.

5. Reform support for struggling mortgage holders

Mortgage Holiday comes to an end on 31 January under current rules, this should be extended for the duration of any lockdown measures. The UK Government should also use the time available to make changes to the Support for Mortgage Interest (SMI) loan by relaxing the zero-earnings rule under Universal Credit and reducing the wait time for SMI payments from nine months to three months. This will help to ensure that the balance of risk between government, individuals, and lenders is fair, and interest arrears on mortgages can be better managed.

6. Rapidly increase access to online learning for disadvantaged children

The move to home learning will widen educational inequality, particularly given the lack of access to devices and the internet for children living in poverty. Despite several schemes being in place across the UK, the Children’s Commissioner estimated they targeted only between a third and a half of children without access to appropriate devices. Governments should urgently seek to address this by making cash or vouchers available to schools to purchase devices for the children that need them most.

But access to devices is only part of this issue. Households on low incomes are less likely to have an internet connection in the home. In England, schools can apply for 4G wireless routers for pupils, and the UK Government has worked with mobile phone networks to enable temporary increases to data allowances to households without fixed broadband access. Government should urgently mobilise, in partnership with local authorities and schools, to ensure those that need this support have access to it as quickly as possible.

7. Convert Free School Meal provision for pupils learning from home in England into cash payments

As has happened in Northern Ireland, most of Wales and some parts of Scotland. Whilst it is welcome that children eligible for Free School Meals will still be able to access them whilst working from home, the quality of provision in the first lockdown was inconsistent and voucher schemes are inflexible, stigmatising and not always easily accessible by families. Cash payments will help to ensure schemes are delivered with dignity and respect.

8. Extend the Test and Trace Support Payment scheme in England

Due to end on 31 January, it should be extended for at least another six months whilst the vaccine roll out continues. The England scheme should follow Scotland’s example, and extend eligibility to parents on low incomes whose children have been instructed to self-isolate and those who may be eligible for Universal Credit, but have not yet applied. Additional funding to local authorities to make discretionary payments to those not eligible for the Test and Trace Support Payment should be re-provided. This will help to ensure that people can afford to self-isolate when they are instructed to.

9. Expand eligibility to Statutory Sick Pay

By removing the £120 per week earnings requirement. Government should also remove the national insurance contribution criteria for eligibility to ‘New Style’ (contributory) Employment and Support Allowance for people sick or those required to self-isolate. This would allow more self-employed people to access this sickness benefit.

10. Extend the Self-Employment Income Support Scheme

The third round of the Self Employment Income Support Scheme will cover the period between 1 November 2020 to the 29 January 2021, but a fourth round, covering the period to the end of April should be implemented to cover this new lockdown period. Government should ensure that the fourth round gets to those on low incomes who most need it. This would mean it comes into line with the Coronavirus Job Retention Scheme available to employees.