Before the pandemic hit, households were already struggling. Household debt had hit a record high, individual insolvencies were increasing, and debt advice charities such as StepChange were seeing record-high use, as were food banks.
At the start of the crisis, the government introduced a number of measures to support households and protect jobs. Years of low wages and benefits cuts meant that many of these changes were long overdue even before pandemic.
But now many of these schemes are being withdrawn, despite the economic impact of the pandemic still hitting households. The impact on people’s livelihoods will be massive.
The return of benefits sanctions
In March, benefits sanctions were suspended due to claimants being unable to search for work or attend jobcentre appointments. The sanctions system under Universal Credit is punitive and cruel, and sanctions are often vastly disproportionate. They can lead to claimants receiving no income for months at a time, often for trivial reasons.
Last week, at the same time as thousands of job losses were announced and the number of vacancies plummeted, the government reintroduced them.
Other changes made to the benefits system, such as the £20 per week increase to the standard payment and the scrapping of the minimum income floor, are still temporarily in place.
The reintroduction of council tax debt collection
The use of bailiffs to collect council tax debt was paused at the start of the pandemic. However, the government, has made the terrible decision to let them resume in late August.
Over 1.3 million households are likely to have built up council tax arrears because of coronavirus. These households need support, not to be subjected to harsh collection methods. The use of bailiffs to collect council tax debt is counter-productive and worsens the situation for to make payments.
In contrast, the Financial Conduct Authority (FCA), which regulates the finance sector, has extended some payment freezes for motor finance and high-cost credit customers until the end of October. Those who have fallen behind on energy bills, however, are already subject to debt collection again, after a brief pause by the regulator Ofgem.
Stop gap measures
It doesn’t end there. As part of its meagre support for those renting in the private sector, the government has suspended evictions. This was initially until 25 June, but has now been extended until late August. As the housing charity Shelter has pointed out, this is a stop gap measure that does little to help those who face eviction as soon as the suspension is lifted. In the long term, it does nothing for those who are struggling with rent payments due to the financial hit of the pandemic. Like other government support during the pandemic, it’s a sticking plaster solution.
In its response to the pandemic, the government has introduced many temporary policies that are left to fall by the wayside when the end date nears, and are only extended if there’s a public backlash. We saw this with free school meal vouchers. The government was not planning to extend the scheme across summer, but reversed its decision after an effective campaign led by the footballer Marcus Rashford shamed them into doing so.
We need a real safety net
The government may have raised the Universal Credit standard allowance by £20 per week, but even with this change, the weekly payment is meagre by both international and UK historical standards, Those on Universal Credit are expected to live off just £92 per week, and those under 25 receive just £79 per week.
The five-week wait for first payment, which pushes people into poverty and debt, remains in place. And the increase only applies to the Universal Credit standard allowance, not legacy benefits. Calls from many organisations to turn the system into something less punitive and cruel, have been ignored.
During this pandemic, the TUC has demanded an emergency overhaul of Universal Credit. This would increase the standard payment to £260 per week, suspend conditionality requirements, and scrap both the five-week wait and the two-child benefit cap. These changes should be the first steps towards scrapping Universal Credit and replacing it with a more generous system built around supporting people, not punishing them.
Sick pay for all
Despite numerous calls for it to be raised, statutory sick pay was only ever increased by its planned 1.7 per cent rise to £96 per week in April. This is around one-fifth of average weekly earnings.
For the millions of workers receiving just SSP, getting ill means facing the choice between going into work with symptoms, or taking a massive pay cut for two weeks. We’re already seeing the impact of this. Last week, an ONS study found that care homes where staff didn’t receive sick pay were more likely to see higher rates of coronavirus among residents.
We’ve also heard numerous news stories of staff either unable to afford taking time off or being forced to come in when sick. Statutory sick pay also isn’t available to all workers: around 2 million miss out due to not earning enough, and around 5 million workers miss out due to being self-employed.
We want to see statutory sick pay raised to the equivalent of a real living wage, and we want it to be available to everyone. Without this, the government’s plans for track and trace will not work in practice.
Protect household finances
Without decent sick pay and a proper social safety net, the pandemic will continue to hit household finances. The impact of the pandemic on household finances is not evenly spread. Pay has fallen steepest among low earners. And the pandemic has actually meant those who have jobs where they can work from home will likely save money during the lockdown.
As IPPR point out, some higher income households who remain in employment, can work from home, and have seen their discretionary spending reduced due to lockdown, will be increasing their savings.
More support is clearly needed for those who are struggling. Since the start of the pandemic, alongside reforms to the social security system and sick pay, we’ve pushed for a fully funded council tax freeze, an expansion of the hardship fund for councils, and more support for renters. It’s time for long lasting ambitious solutions, not temporary fixes.
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