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16 November, 2020 Open access

More than 40 per cent of new benefit claimants during coronavirus crisis have seen their incomes fall by more than a quarter

New Resolution Foundation research also finds that more than half of lowest income families are having to borrow to cover everyday costs such as housing and food

More than 40 per cent of new benefit claimants during the coronavirus (COVID-19) crisis have seen their incomes fall by more than a quarter, according to the Resolution Foundation.

In Caught in a (Covid) trap: Incomes, savings, and spending through the coronavirus crisis, the Resolution Foundation analyses data from an online survey of more than 6,000 working-age adults carried out in mid-September 2020 and finds that a complex picture emerges of the economic impacts of the pandemic on different groups - with some 'winners' in higher income quintiles and others protected from the sharpest income falls, to some extent, by policy actions such as the furlough schemes and temporary increases in universal credit and working tax credit.

Nevertheless, the Resolution Foundation also finds that a high proportion (43 per cent) of adults that had to make a new claim for benefits since February 2020 have seen their incomes fall by more than a quarter, while almost ten per cent of those already on benefits before the outbreak have faced a significant income drop.

Among other key findings on the economic shock caused by the pandemic, particularly on lower-income families, are that -

Highlighting that these findings show that welfare benefits are a far from adequate substitute for earnings for the many families newly reliant on the state for support, the Resolution Foundation says the government needs to act now to prevent the current bad situation from getting even worse -

‘… the primary mechanism for supporting families on low incomes through this crisis looks set to be the social security system. While the government rightly increased universal credit by £20 per week for each family claim back in April this year, this remains a temporary measure. A commitment to maintain this support for the medium term would be a step in the right direction, while other tweaks (such as extending the benefit cap grace period and suspending savings rules) would help those who are falling through the cracks. Although this would cost the Treasury money in the short term, protecting family finances through the crisis can ensure the recovery is not overshadowed by debt and deprivation.’

For more information, see Caught in a (Covid) trap: Incomes, savings, and spending through the coronavirus crisis from the Resolution Foundation website.