Evidence round-up: The household income impacts of COVID-19 and social security

By Dr Sarah Weakley, Research and Impact Officer, Policy Scotland

As the country enters what looks to be a long and slow economic recovery, we are now beginning to see the scale at which the first few months of labour market and economic contraction are impacting on households in the UK. Some of the nation’s largest research organisations, think tanks and charities are beginning to report on the initial impacts of the coronavirus (COVID-19) pandemic and lockdown on household incomes and debt. I highlight some useful pieces of new analysis that illustrate the scale of the crisis facing families and home in on some new and existing evidence on Universal Credit, as it is one of the key policy interventions for families on low incomes.

Both the Resolution Foundation and the Institute for Fiscal Studies (IFS) continue to produce some of the most timely and digestible reports and briefings that detail UK-wide trends on the crisis. The IFS’ Briefing Note of 29 June quantifies the falls in employment in April to May and finds that those in the poorest households are hit the hardest, with a 15% fall in their median earnings. However, for these households they find that they have not fallen further behind on average, primarily as a result of the benefit system. Their work continues to find initial evidence that many families are falling behind on their bills, which suggests a growing debt crisis to come.

The Resolution Foundation also engages with issues of debt and wealth in their report Rainy Days, an annual publication that aims to detail the state of wealth in the UK. Wealth gaps between the richer and poorer families increased markedly in the last decade as a result of increased assets for the richest. This evidence sits alongside the rise in debt for poor households during the coronavirus (COVID-19) crisis, and the lack of savings for many key worker households or those in shut down sectors.

New work from the Joseph Rowntree Foundation and Save the Children on 17 June also points to the debt crisis facing households on low incomes this spring. Their survey of families on Universal Credit found that 70% have had to cut back on essentials and over half have fallen behind on their rent or bills.

Spotlight on social security: research and reports on Universal Credit

The scale of the income crisis for all family types has put a spotlight on the social security system, particularly Universal Credit (UC). Over three million people have now made a claim for Universal Credit and the government is relying on it to support low income households, particularly where other government interventions in the shorter term (the furlough scheme and support scheme for the self-employed) are not available.

The Resolution Foundation’s report This Time Is Different discusses how UC as a system has coped during this crisis, the replacement rates of income between UC and the other government interventions, and how the move to UC has come as a shock to their standard of living. It provides a strong overview of UC and highlights some key policy issues as we consider a second spike in applications in October at the end of the furlough scheme.

New research publications also delve deeper into the lived experiences of people on Universal Credit and expose the ways the system is inadequate in its levels of support, its requirements of claimants and in its administration. These publications and their findings are even more important for policymakers to consider as more households than ever engage with the UC system.

Two projects funded by the Joseph Rowntree Foundations focus in on the lived experiences of Universal Credit claimants in Scotland and Northern Ireland. Professor Sharon Wright of the University of Glasgow partnered with the Poverty Alliance for fieldwork in 2019 as the Universal Credit rollout began in Glasgow for new claimants. The research found that the five week wait period for UC pushes claimants into debt and serious financial distress, that the conditionality requirements and sanctions regime is counterproductive and the award amounts are inadequate for essentials. The Northern Ireland research project led by Dr Ruth Patrick of the University of York also finds these same challenges among the group of participants who helped shape the research and recommendations, and point to negative impacts on mental health as well. Both suggest ways that claimants who do not have the necessary IT skills can be better served by the system, and expose consistent issues with ‘digital by default’.

A new research project called Welfare at a (Social) Distance, based at the University of Salford, investigates the benefits system during the COVID-19 pandemic. It draws upon a new survey of 2,364 new Universal Credit (UC)/Jobseekers’ Allowance (JSA) claimants (carried out between 25th May and 3rd June) to look at how far benefit claimants are connected to the world of work. Initial findings note that most new UC claimants (56%) were connected to work in some way. For those not connected to work but receiving UC they were searching for work (59%) – even when the conditionality requirement was suspended during the crisis until 30 June – but respondents identify that they would benefit from more employment support.

The UK Parliament’s Work and Pensions Committee has released new reports calling on the government to address the issues found in this research, a result of hearings on these issues in the spring. They call specifically for legacy benefits to be uprated in the same way as Universal Credit (as the current system disadvantages primarily older claimants and those with disabilities on legacy benefits), that those currently with No Recourse to Public Funds can be able to access support, and that the five week wait for Universal Credit is removed.

Perhaps the most current live policy issue with Universal Credit is the reinstatement of conditionality and sanctions regime from 30 June. Given the nature of the economic crisis arising from COVID-19, particularly in the lack of vacancies available, there is consensus amongst academics that a reintroduction of the conditionality regime is inappropriate at best, and tremendously harmful at worst.

Research by academics from the University of Glasgow (Prof Sharon Wright, Dr David Webster) have investigated conditionality and sanctions in detail for many years, and find that for many claimants the sanctions regime is ineffective and harmful for claimants. David Webster has been providing briefings on benefit sanctions in the UK from DWP’s statistical releases via the Child Poverty Action Group since 2013, and Sharon Wright’s work in the collaborative ESRC-funded project Welfare Conditionality are two key sources of evidence on this topic to consider if you want to know more about this aspect of UC and it’s impacts on families.

To cite this article: Weakley, Sarah, Evidence round-up: The household income impacts of COVID-19 and social security, Policy Scotland, 2 July 2020, https://policyscotland.gla.ac.uk/evidence-round-up-the-household-income-impacts-of-covid-19-and-social-security

Written content is published under a Creative Commons BY-NC-SA 4.0 licence.