We could be facing a ‘perfect storm’ – but it’s not inevitable

By January 2020, ten years of austerity had left swathes of the population below the poverty line.

The systemic failure of Universal Credit, the shortage of affordable social housing and the insecurity stemming from zero-hours contracts had resulted in 14 million people living in poverty, with not enough income to cover their basic needs. Over half of this number were people living in households where at least one person was employed.

This was the context at the onset of the pandemic, and it soon became clear that Covid-19 was going to have a disastrous impact, not only on businesses, but also on individual and household finances. To mitigate against this, the government took steps including the introduction of the Job Retention Scheme and a £20 weekly uplift to Universal Credit. Legislation was introduced to prevent landlords evicting tenants.

This safety net is now being withdrawn. The furlough scheme and the £20 uplift are scheduled to end on 31 September, and landlords can take action to evict tenants from the end of August.

At the same time forecasters are expecting unemployment to rise, particularly for those in low-wage work. The Bank of England is anticipating a rise in the rate of inflation over the coming months. The result is a ‘perfect storm’, where the most vulnerable communities, who were already struggling with day-to-day survival, will face even greater insecurity.

On Thursday 20 May, Festival of Debate held an online discussion titled A Perfect Storm – Financial Insecurity after Covid-19, looking at how we can respond to the end of these temporary protections, with an emphasis on Sheffield and South Yorkshire, one of the low-wage centres of the UK.

The event was chaired by Mark Gamsu (Citizens Advice Sheffield & Leeds Beckett University) with a panel including Katie Schmuecker (Joseph Rowntree Foundation), Halima Mohamed (African Women’s Health Group), Debbie Mathews (Manor & Castle Development Trust), Clare Lodder (Citizens Advice Sheffield) and Dr Daniel Edmiston (Welfare at a (Social) Distance).

The discussion painted a stark picture of the situation in Sheffield. Even prior to the onset of Covid-19, 35% of children in the city were living in poverty. The pandemic and subsequent lockdowns have also had a disproportionate impact on those already suffering financial insecurity – women, people from ethnic minority backgrounds, and those working in insecure, low-wage jobs. The difficulties experienced by these groups are not just financial, because money worries are also closely connected to sharp increases in physical and mental health problems and domestic violence.

In terms of possible responses to this perfect storm, there were three themes arising from the panel discussion:

1. Campaigning for keeping (and expanding) temporary protections.
2. Taking immediate practical steps to support the most vulnerable members of the community over the coming months.
3. Building back better, so that we are not returning to the pre-2020 status quo, which had already failed significant numbers of the population.

Keeping and Expanding Temporary Protections

A national campaign is underway, not only to argue for making the £20 Universal Credit uplift permanent and providing more security to those in private rented accommodation, but also to extend the £20 increase to those on ‘legacy’ benefits like Jobseeker’s Allowance, who have so far been excluded from the uplift.

No-one should doubt the difficulties of achieving this aim, but there are some sources of optimism. The fact that the government brought in the uplift and then agreed a short-term extension could be seen as an implicit acknowledgement that the benefit levels are too low. Meanwhile the national narrative about the need to increase levels of Universal Credit shows a sharp distinction from the years of austerity.

The government’s showpiece ‘levelling up’ agenda may also be helpful in this respect. The regions of the country with the highest levels of poverty are those areas in the Midlands and North which the Conservatives have made a political priority.

It has been calculated that the withdrawal of the £20 uplift would force millions of people into destitution, but it would also extract £490m from the economy of the Yorkshire and the Humber each year. If the government is serious about levelling up, then keeping the £20 uplift should be seen as essential.

Supporting Vulnerable Sections of the Community

In March 20201, Sheffield’s Partnership Board – with representatives from local government, the private and voluntary sectors, education and health – discussed the urgent issues arising from the withdrawal of temporary protections, and a Financial Cliff Edge Group was formed to consider practical solutions.

Some of the board’s voluntary sector representatives have produced a nine-point plan for discussion at May’s Partnership Board, which included proposals to optimise benefit take-up, increase the capacity of the voluntary sector and create a crisis fund to build on the existing Covid Hardship Fund. While these proposals are sensible in their own right, there is a real concern that the pace of response, locally and nationally, is not sufficient for a deep crisis that is clearly already underway.

'Building Back Better'

Given the hardship and trauma of the last 18 months, it would be understandable to focus on getting back to a pre-pandemic ‘normal’. But this would be both an error and a wasted opportunity.

Covid-19 has exacerbated existing inequalities, but the pandemic only served to highlight the underlying issues of low wages, a social security system that offers recipients no security, and a lack of affordable social housing.

There has been a recognition of these issues in some of the emergency actions taken during the pandemic. There is now a small window of opportunity to rethink some fundamental aspects of our society, allowing all parts of our community to fulfil their potential.

The crisis of World War 2 led to the creation of the welfare state, built on the three pillars of a National Health Service, a comprehensive social security system and affordable social housing. These elements were not chosen at random – they are the basis of a fairer and more prosperous society.

Coming out of the pandemic we should be looking for a similar sense of ambition, not by turning the clock back, but by looking at how these three elements of a comprehensive welfare state can be realised in the 21^st century.

Some examples of the type of creative thinking that is required could include:

• Trialling a universal basic income as an element of functioning social security system. Members of the UBI Lab Network participated in the FoD event and reported that a number of local councils, including Sheffield, have expressed an interest in participating a UBI pilot. UBI is not a panacea for the all the ills of the current benefits system, and it would need to be complemented by some targeted support. But Universal Credit has manifestly failed and there is a compelling argument to trial a universal model which reaches everyone, which is straightforward to administer and has no stigma attached.
• Expanding the community wealth building model championed by councils such as Preston, where the expenditure of the council and local ‘anchor institutions’ like universities and NHS trusts is focused on supporting local businesses and creating good jobs, keeping more money in the region.
• Adopting the ‘income maximisation’ initiative which has been successfully trialled in Glasgow and Edinburgh, where benefits advisors have been located in community health organisations and other community services to help people claim all the benefits they are entitled to.

The next few months will be critical for Sheffield, the surrounding region and for the country as a whole. If we return to the pre-Covid status quo, the impact of ‘the perfect storm’ outlined here cannot be underestimated.

Rather than a ‘levelling up’, we are likely to see communities in large parts of the Midlands and North pushed into destitution. This is a real and present risk, but it is not inevitable. There is an opportunity for us all to come together and work for a real ‘levelling up’ to achieve the ambition of building back better once this pandemic is over.