We’re facing a jobs crisis. It’s vital our benefits system is up to the challenge
The role of our benefits system in the months ahead
The UK is in the midst of a jobs crisis. Figures released last week show that the number of employees on UK payrolls has fallen by almost 700,000 since March, while it’s projected that unemployment may hit 12% by the end of the year.
Government interventions like the Job Retention Scheme have helped millions stay afloat since the start of the pandemic. But the labour market challenges that lie ahead mean bold steps will be needed to safeguard living standards and support the UK’s longer-term economic recovery.
Integral to that will be a benefits system that sustains people over the coming months — and beyond.
What our data tells us
We’re seeing the effects of the coronavirus pandemic first-hand at Citizens Advice. Across our service, benefits and employment are currently 2 of our most in-demand advice areas.
Between March and July, our advisers helped 370% more people with issues relating to selection for redundancy compared to the same period last year. Redundancy is also the top search term on our website at the moment.
While many people will have lost income during this period, others entered this crisis with budgets that were already stretched. 72% of the people we helped with debt between March and June had less than £100 left after covering their essential costs.
The role of our benefits system in the months ahead
Between March and August, the number of people on Universal Credit almost doubled, rising from 3 million to 5.6 million. As we enter the next phase of this pandemic, our benefits system will be more important than ever in supporting households to make ends meet and avoid falling into hardship.
We’ve identified 3 measures that are needed:
1. Make the Universal Credit and Working Tax Credit uplifts permanent
The Government took a welcome step at the start of this crisis in increasing the value of the Universal Credit standard allowance and the basic element of Working Tax Credit by £20 a week. This has helped shore up the incomes of many people who have lost their job or seen a drop in their hours.
But with more redundancies expected with the end of the Job Retention Scheme, the economic fallout as a result of this crisis is far from over.
Making the uplifts to Universal Credit and Working Tax Credit permanent would help preserve the lifeline that has kept so many afloat. Reducing people’s money worries would also put individuals in a better position to focus on steps to prepare and look for work.
It’s also vital this uplift is extended to legacy benefits. Many people receiving these benefits were already facing financial difficulties at the start of this pandemic, which risk getting worse for those who have seen a fall in their income.
2. Ensure benefits keep pace with the cost of living
Most working-age benefits were frozen between 2016 and 2020. This meant an average reduction in real-terms support of £420 a year. Whilst increases to Universal Credit, Working Tax Credit and the Local Housing Allowance have helped reverse this loss for some, many of our debt clients in receipt of benefits are spending more on things like utilities and rent compared to last year.
At the very least, uprating benefits in line with inflation will be necessary in helping people to cover their costs.
3. Extend the suspension of the minimum income floor
The Self-Employment Income Support Scheme has helped many self-employed people whose income has been adversely affected by coronavirus. However, support from this scheme is time-limed at 3 months, and not all self-employed people will be eligible.
Those not eligible for the scheme may need to rely on the benefits system in order to make ends meet. Recognising the impact coronavirus has had on people’s ability to generate earnings, it was a sensible step to temporarily suspend the minimum income floor within Universal Credit.
This measure is in place until November 2020. It’s likely though that there will be self-employed Universal Credit claimants who will struggle to return to normal trading profits after this point, meaning they could see a significant drop in their award due to the minimum income floor.
Extending the suspension of the minimum income floor until at least March 2021 would continue to support self-employed people on Universal Credit affected by this crisis.
We must choose to preserve and extend the changes to our benefits system that have enabled so many to manage during this crisis. This will be critical in providing people with a foundation to build financial resilience for an uncertain future.
