Budget 2023: three big challenges for low-income households that the Chancellor must address

In this briefing we identify three national challenges that matter for families on low incomes across the country:

• the impact of high prices, including for people not in receipt of means-tested benefits;
• labour market participation, in particular the systems that currently fail to support people with ill-health and people with childcare responsibilities;
• the housing downturn, which exposes households to higher costs and has wider undesirable impacts on the housing market and broader economy.

In each area we are looking for decisive action from the Chancellor, and in this briefing we set out the direction that should take.

Recommendations

Helping families through the cost-of-living crisis:

• Keep the Energy Price Guarantee at £2,500 a year or lower for the next quarter, and commit to the implementation of a social tariff to target support more effectively for a world in which bills are elevated for the long term.Start the work towards introducing an Essentials Guarantee. This would make sure the basic rate of Universal Credit at least covers the essentials – like food, utilities and vital household items – and that deductions (such as the repayment of debts to the Government at unaffordable rates) can never pull support below this level.

Labour market participation:

• Improve the support offered to those who get ill while in work, via reforms to sick pay and an expansion of occupational health provision. Widen the eligibility and generosity of Statutory Sick Pay and increase the provision and timeliness of state-provided occupational health support.
• The scrapping of the Work Capability Assessment must be combined with a redesign of the benefit system that supports disabled people and people with ill-health to participate in paid work while maintaining their living standards. Reform needs to proceed working closely with disabled people and people with health conditions, in order to avoid previous policy failures.
• Pay childcare costs for working parents on Universal Credit upfront, as for higher-income parents, while tackling the increasing cost of childcare through funding which reflects the actual cost of care.

Confronting the housing market downturn:

• Unfreeze Local Housing Allowance and establish a new version of the Mortgage Rescue Scheme, giving support with housing costs to the 30th percentile of local market rents.
• To maintain, and ideally enhance, current rates of new housebuilding, imminent underspends on Homes England grant programmes should be recycled into new social rented supply and fund housing providers, to acquire and redesign stalled sites to include more non-market tenure homes.
• To pre-empt and avert a boom in speculative investment in the housing market, the success of the Stamp Duty Land Tax surcharge on investor purchasers should be built on, increasing this by at least double.