A new flagship report finds that families in poverty start 2021 reeling from a triple financial blow:
- Before coronavirus, incomes were falling – and falling fastest – for people with the lowest incomes, as the value of benefit payments decreased, meaning millions were financially exposed when the pandemic hit
- People already trapped in poverty were worst affected by the economic storm caused by COVID-19, as they were more likely to be working in the hardest hit sectors
- Unless the Government makes the right decisions now, there is a risk that families in poverty find it much harder to recover from the third economic shock of a necessary but long third lockdown as the UK looks to rebuild its economy
The third lockdown has rightly prioritised saving lives, as no life that is lost can be rebuilt. For families in poverty this has been a year of relentless pressure simply to stay afloat. Trying to work, care for children and stay healthy during a third lockdown will push many to the brink when they have few resources left.
Throughout the pandemic, many steps have been taken to support families, but often at the eleventh hour, adding the pressure of uncertainty in a highly stressful time. It’s essential that the Government’s actions to rebuild the economy after the pandemic recognise and prioritise those who have borne the brunt of this crisis, and offers the skills and opportunities needed to build resilience and escape poverty. This means committing now to a good jobs recovery that brings opportunity and decent living standards to every part of the UK and turns back the tide of in-work poverty.
In April 2020, the Government rightly increased Universal Credit by £20 a week to help ease the pressure and support people who were already trapped in poverty before the pandemic, and those newly struggling due to recent job losses.
The Government must do the right thing and as a first step confirm that the uplift in Universal Credit will be made permanent and extended to people receiving legacy benefits. There is strong public support for this policy choice, and as the Government charts a new course in 2021 it has an opportunity to align with the public’s values on this key public service.
Pre-pandemic: Falling incomes for Britain’s worst-off families
Even before the pandemic the standard of living was falling fastest for people on the lowest incomes. Little progress had been made on poverty, and child poverty had been steadily rising. This rise was predominantly driven by the benefits freeze between 2016 and 2020 which meant support did not keep up with the cost of living.
- There has been a consistent rise in poverty among working people in recent years with almost a quarter (23%) of workers in the lowest paid sectors of retail, and accommodation and food living in poverty in 2018/19 - more likely to be women, young people and from ethnic minorities.
- While hourly pay has risen since 2014 because of increases in the minimum wage, lower-paid employees were offered fewer hours and little chance to progress at work.
- A third (35%) of Bangladeshi and Pakistani workers were in poverty in 2018/19 – around three times the rate for White workers (12%).
- More than a third (37%) of private renters were living in poverty, with the proportion of households renting privately almost doubling in the last 20 years from 10% to 19% of all households.
Pandemic hits: the disproportionate impact of Covid-19 on people trapped in poverty
People who were already trapped in poverty were particularly vulnerable to the financial shock caused by the pandemic due to their work being precarious or in sectors most affected by ongoing restrictions.
- Workers on the lowest incomes experienced on average the largest cut in hours at the start of the pandemic. 81% of people working in retail and accommodation saw their income drop.
- 4 in 10 workers on the minimum wage face a high or very high risk of losing their jobs compared to 1% of workers earning more than £41,500
- More than a third of single parents working in hospitality and over a quarter of those in retail were already living in poverty before their sectors were severely hit by restrictions.
- Workers from Black and minority ethnic backgrounds face the injustice of being 14% more likely to be made unemployed and 13% less likely to be furloughed. Evidence from the previous recession showed Bangladeshi and Pakistani workers were among those most likely to lose their jobs. This needs to be avoided in any coming wave of unemployment.
- It is deeply concerning that 45% of disabled people who were in employment at the start of the year reported no earnings by the middle of the year.
- 35% of private renters and 42% of social renters were also working in the sectors hit hardest by COVID-19. One in three were furloughed. 30% of private renters were worried about paying their rent through the winter. According to polling in October across both the private and social rented sectors, 700,000 were already in arrears with their rent in the autumn.
Post-pandemic: those on the lowest incomes need urgent support to recover from lockdowns and job losses
UK Poverty 2020 – 2021 shows how the first lockdown in 2020 impacted families in poverty the hardest (as they faced increased living costs due to children being off school, lost work and built up extra debts). Those same families are now facing the latest lockdown in the heart of winter. Keeping children fed, warm and online for the weeks ahead will only increase the pressure on families as we all wait for the vaccine to roll out and the country to open up again.
Melanie, a former HR consultant living in Surrey, has been part of JRF’s UK Poverty Grassroots Action Group. She says:
“Since I was made redundant in the financial crash I have been working whenever I can and I set up a new business in 2018, but the work dried up during the first lockdown and we had to close. I have been caring for my 88-year-old father as well as bringing up my son and I haven’t been working since October. The job situation is pretty bleak. I’m at a loss about what to do next. I have tried so many things to better myself. I consider myself quite a strong, educated and confident person, and I know I have so much to offer.
“I know this lockdown is necessary but it’s also another thing to battle through after all the struggles of the last year, and I want the system to work much better for people in my position once we get through this. One thing that has helped a little is the temporary £20-a-week uplift in Universal Credit. That extra £20 gave me a little bit more wiggle room, we’ve relied more on corner shops because they had the stock (in the first lockdown) – they were a lifeline when the supermarkets were running out. But my £50 weekly shop went up to about £80. All the offers and discounts stopped – the £20 didn’t go that far but it did make a difference. I always needed that extra money to get me through.”
JRF has set out ten actions the Government should take to offer support for people in poverty in this third lockdown: https://www.jrf.org.uk/blog/ten-urgent-actions-government-must-take-keep...
Helen Barnard, Director of the Joseph Rowntree Foundation said:
“It is a damning indictment of our society that those with the least have suffered the most before the pandemic and are now being hit hardest once again by the pandemic. The Government must now make the right decisions to avoid another damaging decade.
“It’s unacceptable that certain groups are bearing the brunt of the economic impact of COVID-19, and are now reeling from the latest blow of this third lockdown. We all believe in justice and in looking out for each other, and we support policies that reflect these values. Ministers were right to increase Universal Credit by £20 a week and they must now make it permanent and extend this support to legacy benefits.
“2020 was an extraordinarily difficult year for all of us and has shifted the dial in terms of what support is possible. Learning from this, there are serious injustices we cannot put off tackling any longer. We must not rest until everyone, regardless of their background, is able to achieve a decent life.”
Our previous report on how Brexit could affect poverty in the UK found that the parts of the country that are already locked out of prosperity, including areas in Northern England, the Midlands, Wales and Northern Ireland, are more exposed to the impacts of non-tariff trade barriers and potential disruption in trade with the EU. Jobs and earnings could be disproportionately affected in these areas, many of which had high levels of poverty and unemployment before the pandemic and hit hard by its economic impacts.
The UK government must protect people and places in poverty from the impacts of any disruption following Brexit and ensure that any new opportunities post-Brexit bring tangible gains for those people who have been shut out of prosperity for many years