Government’s emergency response to the COVID-19 pandemic is not enough to paper over cracks of UK’s ‘threadbare safety net’, says New Economics Foundation

Highlighting that more than 20 million people are falling below a 'minimum socially acceptable standard of living', think tank calls for introduction of a Minimum Income Guarantee

The government's emergency response to the coronavirus (COVID-19) pandemic is not enough to paper over the cracks of the UK's 'threadbare safety net', the New Economics Foundation (NEF) has said.

In a new briefing, the NEF argues that, despite the government's new job and income protection schemes - which have been 'tweaked and fiddled, reversed and reviewed, extended and amended' - millions of people are at risk of falling through the cracks and will have to rely on a social security system that has been 'starved of resources' after a decade of austerity. It estimates that in November 2020, 20.6 million people will fall below the Minimum Income Standard - the level for a 'minimum socially acceptable standard of living'. This, the NEF says, is driven by two primary factors - 

• some households have lost income due to being placed on furlough - the job retention scheme only mandates that workers retain 80 per cent of their normal salary (and only a minority of employers voluntarily top up this income), and while in some cases universal credit can provide a small top-up for those on furlough, in almost all cases this does not fully replace lost salary; and
• households have lost income due to unemployment and a loss of working hours - for example, the Resolution Foundation estimates that 4 per cent of workers have lost more than 10 per cent of their income despite not being furloughed, primarily due to a reduction in working hours.

In addition, the NEF highlights that the number of people living below the Minimum Income Standard is set to rise further - increasing to 22.5 million in April 2021 if the government does not maintain the £20 per week increase to universal credit and working tax credit, and to 21.7 million if the increase is extended beyond March 2021.

In order to avert a crisis in living standards, the NEF therefore proposes a temporary Minimum Income Guarantee (MIG) - suitable to be implemented at short notice pending its long-term proposal to replace universal credit with a 'living income' - with the following features - 

• every working-age adult would be entitled to apply for a weekly payment worth £227 per week - equal to the value of the 2020 minimum income standard for a single adult, excluding any housing or childcare costs which would be addressed separately;
• for existing claimants, the top-up to their current benefits would be automatic and would not interact with the benefit cap, and new claims for the MIG through sick pay would operate on the same basis as sick pay today, with an effective increase in sick pay to £227 per week; and
• initial entitlement to the MIG would be extended to all working-age adults who wish to apply via the advanced payment system in universal credit - claimants would also be able to apply for and receive their MIG payments while receiving support from other income protection schemes, although the MIG payment would only top up post-tax income to a combined maximum of £227 per week for those already receiving support from these schemes.

Advising that the additional cost of the MIG for existing benefit claimants would come to around £6 billion a month, the NEF concludes - 

'Rarely have so many people suddenly and simultaneously experienced the same fears over how they will feed their families, how they will heat their homes and whether they will have jobs to return to in the new year. These proposals will help to ensure that everyone can live in dignity during the worst of the pandemic.'

For more information, see Falling through the Cracks from neweconomics.org