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What does the Spending Review mean for Britain’s poorest?

Rishi Sunak’s £394bn master plan to lead the country out of an economic mess is being described as a 'missed opportunity'. Here’s why.
Image credit: HM Treasury/Flickr

There was a lot riding on the Government’s Comprehensive Spending Review. Chancellor Rishi Sunak was tasked with plotting the UK’s path out of Covid-19-driven economic catastrophe and he laid bare just how deep a ditch the UK had driven into thanks to the pandemic.

The Office for Budget Responsibility figures showed just why the Chancellor had to get it right. The economy has contracted by 11.3 per cent and is not expected to recover until the fourth quarter of 2022. Meanwhile, unemployment is projected to rocket to 7.5 per cent in 2021, meaning 2.6 million people will be out of work.

Some top lines were leaked ahead of the Spending Review – which set out public spending for the next year rather than the three-year plan originally promised, thanks to Covid-19 uncertainty – and the public sector pay freeze grabbed the headlines.

In his £394bn splurge, Sunak promised £254 million to end rough sleeping as well as billions for house-building funds, job support schemes, local councils and environmental projects.

But anti-poverty groups have slammed the Spending Review as a “missed opportunity”. 

To find out why, we asked six members of The Big Issue’s Ride Out Recession Alliance, who have joined us on our mission to protect jobs and prevent homelessness during and after the pandemic.

Shelter

What they asked for: Social housing and lots of it. Shelter’s view has always been: “Only by investing in decent and affordable social homes, will we be able to end homelessness in all its forms for good.”

They also urged the government to do more to help people keep their homes, calling for the benefit cap to be scrapped and benefit levels to be kept in line with the cost of rents.

Shelter also wanted the government to commit to giving anyone facing homelessness this winter access to emergency accommodation.

What they got: While the £254m announced to end rough sleeping was welcome, there was barely a peep from Sunak on benefits in his speech. A £7.1bn National Housebuilding Fund was announced on top of the £11.5bn Affordable Homes Programme unveiled in March but how that will contribute to Shelter’s target of 3.1m social homes over the next two decades remains to be seen.

What they said: Polly Neate, Shelter chief executive, said: “With dire forecasts of soaring unemployment and rough economic seas ahead, today’s Spending Review offered barely any hope for struggling families.

 “The Chancellor talked about the importance of home, but with no new money or urgency to build the social homes that so many are desperate for. Nor was there any reassurance that the welfare safety net will be there for people in their time of need. In fact, a red flag hidden in the small print suggests the government will freeze housing benefit next year, amounting to a real-term cut for families battling to keep up with rent. 

“This was a missed opportunity to tackle our out-of-control housing emergency. You cannot defeat rising poverty or homelessness with courage alone.”

Generation Rent

What they asked for: Generation Rent’s asks were centred on keeping renters in homes. They demanded that Local Housing Allowance be raised to cover the median rent in all areas as well as calling on the government to scrap the benefit cap. 

GR also wanted renters who racked up rent arrears during the first lockdown to be provided with grants to pay off their debts.

What they got: None of the above. In fact, the Spending Review suggested that Local Housing Allowance will be frozen in cash terms from April 2021 – meaning it will fall back below a third of rent. This means that families will struggle to cover the cost of their rent.

What they said: Alicia Kennedy, Generation Rent director, said: “Today’s statement was a missed opportunity to protect renters who have lost income due to the pandemic against debt, hardship and homelessness.

“The announcement of extra funding for rough sleeping is welcome, but does not deal with the root of the problem – renters on Universal Credit in an average property don’t get enough to pay the rent, and the Government’s announcement of an LHA freeze will make this worse.

“Our broken benefits system has left renters footing the bill for coronavirus. To support renters who have lost income due to the economic shock of the pandemic, the Government must increase LHA to cover average rent, scrap the benefit cap, and make grants available for those who have built up unmanageable debt during the first wave.” 

Nationwide Foundation

What they wanted: More money for community-led housing. The Government’s Community Housing Fund gave £163m to community-led housing groups in 2018 to boost England’s housing supply. 

This funding was only intended to run until March 2020, however, and there has been no sign of a new influx of cash. NF say that for every £1 spent on community-led housing, the public benefit £2.70 over the following decade.

What they got: There was no mention of the Community Housing Fund in the Spending Review. 

However, Sunak did reveal a new Levelling Up Fund worth £4bn for England and £0.8bn for Scotland, Wales and Northern Ireland. The fund will be available for local infrastructure projects and support economic recovery.

What they said: Nationwide Foundation chief executive Leigh Pearce said: “We are disappointed at the government’s decision not to renew the Community Housing Fund. As it stands, there are over 10,000 community-led homes that are awaiting funding, ready to be built in cities, towns and villages across England; many of which are in areas that the Levelling Up Fund is likely to want to reach.

“Today’s decision not to fund the Community Housing Fund makes delivering these affordable homes more difficult. As the government plans the details of the Levelling-Up Fund, we’d call on them to include community-led housing so that groups across England can continue to build homes in the places they’re needed, at prices people can truly afford.”

New Economics Foundation

What they wanted: NEF unveiled their Winter Plan for Jobs, Incomes and Communities in the days before the Spending Review. They called for a Universal Basic Income-style living income of £227 a week for those that need it. 

The think tank also demanded that the Chancellor remove the spring deadline on the furlough scheme and invest to create a million new low-carbon jobs along with retraining and re-skilling for people to take them up over the next 18 months.

What they got: The jobs support in the Spending Review largely centred on a £2.9bn Restart Scheme for “intensive and tailored support” to help people find jobs. And the Chancellor also promised to increase the national living wage by 2.2 per cent to £8.91 per hour as well as boosting the national minimum wage.

What they said: Miatta Fahnbulleh, New Economics Foundation chief executive, said: “The Chancellor made clear the sheer scale of the economic crisis we face and yet his response failed to rise to the challenge. Behind the headline numbers are millions of people whose livelihoods have been hit. And he needed to do more to support them.

“No additional support for those struggling on Universal Credit or those excluded means many will face real hardship next year. And the Spending Review fell short of the level of investment needed to create good, green jobs to deal with record levels of unemployment.”

Child Poverty Action Group

What they wanted: The benefit cap and two-child limit on welfare payments to be scrapped. CPAG said that it would cost the government £1.4bn to axe them but would ease pressure on struggling households across the UK. They, too, asked for the £20 Universal Credit increase to be made permanent beyond April 2021.

What they got: Neither the benefit cap nor the two-child limit were axed while the £20 Universal Credit ‘uplift’ is still set to end next spring. And now people who claimed Universal Credit in March and received the £20 increase could be set to hit the benefit cap, reducing their income just before Christmas.

What they said: Alison Garnham, CPAG chief executive, said: “The Chancellor had an opportunity to take some of the worry away but chose not to – struggling families will not forgive the Government if they continue with their callous plan to reduce levels of Universal Credit and Working Tax Credits in the spring.

“The Government acted quickly to reinforce the UK’s safety net when the coronavirus struck. It should cement that achievement by retaining the uplift and extending it to people who are having to rely on legacy benefits, including people who are sick or disabled.

“The Government needs to address the growing child poverty crisis, made worse by Covid-19, with the same urgency it is investing in finding a vaccine.”

Zacchaeus 2000 Trust

What they wanted: Not only did Z2K want the Universal Credit increase to be extended, they also wanted people living with disabilities and others on legacy benefits to receive the “lifeline” too. 

Failure to do so would mean the “discriminatory two-tier welfare state” would continue and leave behind two million people on legacy benefits would be left behind, said the charity.

What they got: There was no word on the Universal Credit increase being made permanent while legacy benefits were increased by 37p a week.

What they said: Ella Abraham, Z2K’s policy and campaigns officer and campaigns co-chair of the Disability Benefits Consortium said: “The Chancellor’s 37p a week ‘rise’ for those on legacy benefits is pitiful. 

“And we know that those who haven’t had the £20 increase people on Universal Credit have had to choose between heating, eating and medical treatment. That will be even worse this winter. We will be redoubling our efforts to persuade the Government to end this discriminatory two-tier welfare state and make sure everyone has the money they need to live on.”