Opinion

Budget 2021: 5 tests for the Chancellor to ease poverty after the pandemic

As the Chancellor prepares to delivery his the Spring Budget 2021, JRF's head of economics, Dave Innes, lays out the five tests he says are needed.

energy price cap

Up to 28 million households could receive tax rebates or a loan to pay energy bills. HM Treasury/Flickr

We have all been living through a global pandemic, and it has been hard. But the impacts on health and on our finances haven’t fallen equally. If your housing or work situation is unstable it has been an exceptionally hard year, and it is hard to see the end in sight even as the vaccine makes inroads into the disease itself.

When announcing his roadmap out of the pandemic the Prime Minister pledged not to “pull the rug out” from under people who needed support. Tomorrow’s Budget will be a significant moment when we assess whether the response is setting a course for a recovery which leaves nobody behind.

The 2021 Budget should be a moment to seize the opportunity for change and avoid a return to the pre-pandemic normal. That version of normal meant too many jobs that lacked security, dignity and decent pay. It meant people being pushed into poverty by their housing costs and a social security system that did not do enough to keep people afloat.

At The Joseph Rowntree Foundation we will be looking at five key tests for the Chancellor to pass for the Government to be making good on their pledge and loosening the grip of poverty.

1. Has the Chancellor extended the £20 uplift to Universal Credit and Working Tax Credit for at least another year?

Firstly, we will be asking whether the Chancellor has extended the £20 uplift to Universal Credit and Working Tax Credit for at least another year. Taking this lifeline away will result in an overnight cut in income of £1,040 per year for 6 million families.  It will pull an estimated 500, 000 people into poverty, including 200,000 children.

The six-month extension reported as the Chancellor’s preference is a short-term fix that would simply delay this pain until the worst possible moment. It would cut out-of-work support to its lowest level since 1990, just as unemployment peaks in the autumn and jobs remain scarce.  We also need to see the Chancellor extend this same lifeline to people on ‘legacy’ benefits who have so far unjustly been left behind.

2. Has the Chancellor announced measures to protect jobs and help the unemployed back into work?

Secondly, we will consider whether the Chancellor has announced measures to protect jobs and help the unemployed back into work. As restrictions are lifted, we want to see a cautious phasing out of the Coronavirus Job Retention Scheme which encourages more workers being kept on part time, rather than fewer full time. As long as ongoing Covid restrictions are in place, we want the full furlough scheme to be available to businesses who can demonstrate negative business impact as a result.

We also want to see details of a comprehensive plan to tackle unemployment, supporting people to retrain and get back into work.

3. Has the Chancellor announced measures for England to support those in rent arrears and at risk of eviction?  

Thirdly, we will examine whether the Chancellor has announced measures for England to support those in rent arrears and at risk of eviction. At least 700,000 renters are already in arrears putting them at risk of eviction.

Around 2.5m households say they are worried about paying their rent. Scotland and Wales have introduced schemes to help people in this situation. We want to see more money for discretionary housing payments in England to help people in arrears.

4. Has the Chancellor set us on a course for recovery that leaves no one behind?

Fourth, we will look at whether the Chancellor has set us on a course for recovery that leaves no one behind. It is important the Chancellor listens to the many economic voices saying that he should bake in recovery before addressing the public finances.

Now is not the time for tax rises that would slow the recovery. We want to see evidence of new spending to act as a stimulus to help a faster economic recovery and avoid people being pushed into poverty by long term unemployment.

5. What does the Chancellor’s budget mean for poverty in the UK?

Finally, we will examine all of these areas to assess what the Chancellor’s budget means for poverty in the UK overall. Looking across the measures announced, we will make an assessment of whether this is a budget which has ‘wrapped its arms’ around those families in poverty who have been hardest hit by the pandemic and stopped other from being pulled into poverty.

The pandemic has shown us that people’s life chances have been profoundly affected by where they live, the colour of their skin and how much money their family has. We have the choice to build a better future, with good jobs and investment in people and their skills, with genuinely affordable housing and a social security system there for us when we need it.

The Chancellor has the chance tomorrow to set a course for recovery which make an impact on those life chances and shows that he shares those ambitions.

Dave Innes is JRF’s head of economics.

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