Although there are reasons for cautious optimism about the UK’s economic recovery, the emerging picture when it comes to the impact of coronavirus on employment and family incomes looks grim.
The full extent of the damage to the labour market won’t be clear until later this autumn when the furlough scheme is due to end. But recent data showing dramatic falls in company payrolls, hours worked and job vacancies point to a prolonged period of higher unemployment.
For millions of families across the UK, this will mean reduced incomes and an increase in hardship. It is clear that some of the worst impacts will be felt in communities that were previously experiencing deprivation. Dozens of local authorities with the highest levels of child poverty have already seen some of the biggest rises in unemployment post-coronavirus.
“Low-income households have experienced five years of real income stagnation.”
- Stephen Crabb MP.
The government deserves enormous credit for the huge scale of assistance that has already been provided during this pandemic and for how quickly vital parts of the safety net were put in place as the crisis unfolded.
The financial support provided to families through the Coronavirus Job Retention Scheme, Self-Employed Income Support Scheme and enhanced universal credit has been more comprehensive than that provided by any other government.
But many individuals and families will require ongoing financial support to prevent them falling into financial crisis and poverty.
Following the last recession, the recovery was characterised by record employment. Yet despite this, in-work poverty rose significantly. A key driver of this was weakened social security support which left families struggling to cope with the low pay and fluctuating hours that characterise the jobs that many low-income parents hold.
It is important for Conservatives, who rightly hail the boost to pensioner incomes as a result of the triple lock, to recognise that the other side of that coin was a prolonged squeeze on benefits for people of working age. Low-income households have experienced five years of real income stagnation, largely due to falls in income from benefits which offset growth in employment incomes.
Our efforts during this recovery should be focused squarely on supporting working age people on low incomes.
As a first step, the government should make permanent the additional £20 per week for the universal credit standard allowance that it brought in to strengthen social security during the crisis. Removing it next spring, as currently planned, will amount to a painful cut in income for many people still struggling to come to terms with the loss of their jobs and who have found the transition from furlough to benefits a very hard landing indeed.
In parallel, the personal allowance of so-called legacy benefits like JSA, ESA and IS should be raised to match the universal credit increase. This is particularly important for those with disabilities, and their carers, who make up most of the people remaining on these benefits. It’s just not right that some of the most vulnerable people have not seen equivalent protection.
The government should also look at targeted extensions to the furlough scheme beyond October. A definitive end point was seen as vital for getting the country back to work. But there are still many firms in different sectors that simply cannot operate in the current scenario.
Some of these sectors are of enormous strategic importance to the UK. With aerospace, for example, there is a real danger that the unwinding of furlough will lead to the loss of thousands more high value jobs and a permanent dissipation of skills and expertise. Germany, which knows all about retaining domestic industrial strength, has just decided to continue its furlough scheme for another 12 months.
The costs of all this are very substantial and there are many who would rather invest instead in re-training and new apprenticeships. But it’s not either/or. A stronger safety net to protect families makes a successful recovery more likely, not less.
The Rt Hon. Stephen Crabb is MP for Preseli Pembrokeshire and a former Work and Pensions Secretary.