ourEconomy

How to fix the UK's safety net: a four point plan

Offering more debt isn’t good enough. It’s time to guarantee incomes for all, look after renters and protect the self-employed and low paid.

caroline m.jpg
Caroline Molloy
19 March 2020
Kirsty O'Connor/PA Archive/PA Images

As disaster capitalists work out ways of keeping “the economy” afloat or even resurgent after this crisis, what about the rest of us?

And what does “the economy” even mean, in the current context? Looking at the collapse of the stock market, in the any absence of new natural resource scarcity, it rather suggests that the economy is people. But for many witnessing Johnson’s and Sunak’s botched moves so far, the economy appears to mean their friends in the banking, insurance, aviation and insurance industries.

But what of the people? Those currently being forced to choose between “health and hardship”, as John McDonnell puts it? Between lives and livelihoods? What safety net is there for us if we “do the right thing”? Because that safety net is absolutely critical right now. As the New York Times tells us:

“Research on influenza has found that in an epidemic, poverty and inequality can exacerbate rates of transmission and mortality for everyone…Because each low-income family forced to accept a higher risk of exposure can infect others... the consequences of inequality, while most obviously felt by the poor, “put the broader society at risk.””

On Monday Boris Johnson told us to cut down on ‘non-essential’ social contact and to work from home if we possibly could. But the government is lagging behind reality. Workplaces are closing, contracts are being cancelled, work is collapsing for many, transport is being scaled back and stricter lockdown measures seem imminent, and employers both large and small are responding patchily at best. Most people aren’t in workplaces where they have a union to help protect them. 5 million are self-employed, many in, or connected to, industries that are currently collapsing.

So what now? Grassroots union activists are gearing up to organise both workers and other activists in this new world, particularly workers currently worried about whether they’ve got enough protection if they are still being asked to turn up. And mutual aid networks are springing up everywhere too. But it seems inevitable that whatever starts happening locally, government is going to have to do far, far more than would have been considered politically possible in recent years, if we’re not going to see Depression-era hardship and severe economic dislocation.

Because after years of attacks, here’s what our so-called safety net actually looks like. I set this out not to scare people, but merely because there’s a lack of understanding about it, which needs to be addressed before turning to solutions.

A warning – this next section is necessarily complicated, though I’ve tried to simplify it as much as possible. If you want to check your exact entitlements in the current system, Turn2Us has a very useful benefits calculator, or you could check with advice centres, though these have been underfunded in recent years and are currently struggling under demand. It should also be noted that many migrants are currently ineligible for any of the benefits set out below – a situation that also needs to change urgently.

The state of our safety net right now

Employee with symptoms

If you are sick or self-isolating because someone in your household is sick, you get £94.25 per week maximum by legal right, unless more has been negotiated with your employer. If you’re one of the 2 million people earning less than £118pw you are entitled as a single person to £73.10 per week through Universal Credit (UC), or £57.90 if you’re under 25.

You may be entitled to help with rent costs as well, and more if you have a family. But you may not get much or any help if your partner is still working or you have even fairly small savings, because Universal Credit is assessed taking into account household income and capital. Also, benefit help with rent is limited to the ‘local housing allowance’ rate which is deliberately set below the market cost of housing in each area, and is even lower for the under 35s.

Employee without symptoms

Everyone else is currently expected by government to continue to work – and if the nature of your job means you can’t work from home, then you’ll need an enlightened (or strongly unionised) and well-off employer who’ll either give you the protection you need (if your work is truly essential), or send you home to keep you and everyone else safe, and keep paying you either way.

If not, if your work has closed for the foreseeable future, you’re legally entitled to a grand total of £145 ‘lay off money’ from your employer over 3 months. Beyond that, you’re entitled to just the same benefits as low earners, i.e. £73.10 UC per week for a single person over 25, subject (currently) to meeting its work search requirements (see ‘existing claimants’ below). You’re also entitled to some help with rent. But all payments are also subject to the same rent, household income and capital rules mentioned in ‘employee with symptoms’, above.

Self-employed person with symptoms

If you’re one of the 5 million self-employed, and you’re sick or have a sick household member, you’re eligible for the same amount as the 2 million low paid – ie £73.10 per week if you’re a single person over 25, plus some help with rent. According to the insurer LV, only 4% of self-employed people have their own private safety net of ‘income protection insurance’, with most citing low earnings as the reason they don’t. You’ll either get the payment through Employment Support Allowance, if you’ve got a steady history of employment and national insurance contributions, or Universal Credit if not (subject to meeting household income and savings conditions set out in ‘employee with symptoms’ above).

Self-employed person without symptoms

If your problem is that business has completely dried up as everything is cancelled, or you’ve cancelled it yourself to protect your clients, then Universal Credit is your only state fallback – but the rules make it very difficult to get very much, even if you meet the household income and savings conditions. The ‘minimum income floor’ rules were waived last week but only, so far, for people who are sick or have a sick household member. People who are not themselves sick or in household isolation are currently still assumed to be earning full time minimum wage pay (a bit less if they have caring responsibilities), so are currently likely to get just a little bit to ‘top up’ these increasingly mythical earnings, depending on their level of dependents and health needs.

Existing claimant (including employees claiming in-work benefits like Universal Credit)

You may already be claiming in-work benefits to top up low wages because you work part time, mostly if you have dependents or health issues yourself (as Universal Credit is replacing tax credits and other benefits for these groups). If your wages continue but are reduced, your Universal Credit should be adjusted upwards but current rules state that if your wages fall below £338 per month (£541 month for a couple) you will be expected to look for more work and spend more time looking for work, or face possible sanction.

If you’re currently claiming benefits because you’re out of work, and have not been assessed as having a work limiting health condition, then it would appear from current Department of Work and Pensions (DWP) guidance that you’re still expected to be actively seeking work at the moment, and spending all the working week job searching. The current DWP guidance says this “must be your full time focus. If you do not do this without a good reason, you will have a cut to your Universal Credit, known as a sanction…You should think of jobseeking as a full time job. You will be expected to look or prepare for work for 35 hours a week…”. There are some adjustments about the hours parents and carers are expected to work / job search – it’s 25 hours a week for the main carer of a child aged 5 to 13.

What counts as a “good reason” not to meet these job search requirements, is currently at the discretion of your work coach, and the government does not yet appear to have issued clear revised guidance on this. The current rules also expect people to apply for and accept work that involves a three hour commute, on pain of sanction.

What on earth is the DWP doing?

Clearly, all the punitive and over-complicated conditions and sanctions in our benefit system are a nonsense right now. They need to be scrapped immediately, along with a big hike to the rates themselves. But the government hasn’t announced any such measures, merely that people won’t have to have in person health related interviews, and some minimal interventions about waiting time.

I asked the Department of Work and Pensions (DWP) whether they have plans to change any of this. Whether they’re issuing new rules, scrapping sanctions, suspending work search requirements for everyone but particularly parents now caring for children off school, lifting the minimum income floor, or anything else to improve their system in this crisis. Whether people will need to sign on for work related benefits in person, and whether they’re expected to be travelling around for job interviews.

The Department press spokesperson merely directed me to existing guidance, which has changed very little apart from for people who are currently sick or have a sick household member. They directed me to a page stating, "If you are staying at home as a result of coronavirus, your mandatory work search and work availability requirements will be removed to account for a period of sickness." This phrasing would seem to infer that a that “period of sickness” does not mean “until this pandemic is over”, but rather, “during your own or your household’s sickness”. It offers little reassurance to people who have lost income, or are about to, not due to sickness but due to losing work in this crisis or having to stay home to look after the kids. Nor to people who are already on benefits, and worried about getting sanctioned if there is no realistic chance of applying for jobs and suddenly even fewer jobs to apply for.

I put the analysis above to the DWP and they declined to comment further.

So what is to be done?

It doesn’t have to be this way. It can’t be this way, and fix it we must. The DWP’s silence is unacceptable. Johnson and Sunak’s silence on income protection is unacceptable. We can’t have people waiting for weeks on end, relying on even more debt, and then living on next to nothing for months on end. Frankly, there’s already too many people living on next to nothing, including 4.1 million children in poverty (most of them with parents in work), and they can tell you how utterly terrible for your physical and mental health that is. Our physical, mental and financial health needs all the help it can get right now.

Everyone from the TUC to Chatham House, the CBI to the OBR’s outgoing boss, autonomist unions, opposition parties, rebel Tories, campaign groups and non-governmental organisations are weighing in with their demands. A number of people are pointing out that we need to think about what solutions could be implemented quickly through existing systems. We also need to ensure solutions won’t store up a post-crisis debt problem for individuals and productive businesses (we should have learned that lesson from 2008, that more credit and debt inflates asset bubbles and undermines real resilience).

After years of stagnant real wages, the average household has unsecured debt (i.e., excluding mortgages and car loans) of over £15,000. Most people are just a paycheck or two away from penury. We can’t allow that to just unfold.

The people who’re already hard up, and already in the benefit system (including tax credits/Universal Credit and child benefit), need to be the top priority. The majority of families in the UK already rely on state benefits for a significant proportion of their income, and will continue to do so, after this crisis.

And they’re the people whose lives are going to be hardest hit just now, the ones most likely to lack a sympathetic boss, a nice garden, a spare bedroom and bathroom or two, excellent broadband, cupboards full of food, a car, savings in the bank, a big credit card limit, family members who can help, not too much expensive debt and arrears already, and all the other things that the professional classes are currently comforting themselves by remembering.

1. A liveable income guarantee for all

Given the complexity and inadequacy of the current benefit system, the temptation to just bypass it altogether is understandable. But I’d like to make a plea to consider fixing Universal Credit so that it actually fulfils the function it was supposed to – a safety net for all. A liveable level of income, below which no-one is allowed to fall.

With the political will, surely it could be fixed quickly. Now is not the time for ideology, we’re being told. Here’s how it can be done.

Have a one page form for Universal Credit. Scrap all the work search conditions – it’s absurd to be expecting people to be job hunting right now. Scrap the sanctions regime – today. Every single member of DWP staff who’s working, ought to be spending their time working on getting money into people’s hands right now, not on depriving people still further through sanctions. Scrap the “no recourse to public funds” rules that mean many migrants on work visas have no safety net at all.

Most importantly, set Universal Credit allowances at a level people could actually live on – the real living wage of £9.30/hour, or £372/week. It’s a liveable income guarantee, for all. It already functions like this for some, just at far too low a level. Significantly increase levels of, and eligibility for, child benefit, carers and disability premiums, for people with those additional responsibilities and needs. Significantly relax the very tight household income and savings rules that prevent many being eligible, or just scrap them all for simplicity’s sake. Get rid of the minimum income floor, that invents ‘imaginary’ income for many, for everyone. Ensure it is paid fast-track, not with a 5 week wait.

Some of this might be channelled through employers, where applicable, to maintain people in employment and avoid layoffs, using whatever mechanisms are most readily available. All government support to business must be conditional on prioritising paying workers and keeping jobs open to return to. The current government approach of offering employers large loans offers no guarantees that employers will want to get heavily indebted to keep their wage bill going for a lengthy period.

2. Rent caps and no arrears

A liveable income guarantee would be sufficient to cover reasonable, but not excessive rents. Private rents could be capped at the level of the Local Housing Allowance – the amount that the current benefit system pays up to. This may need to be raised back to average rent levels, as it used to cover, though in recent years it’s deliberately been held way below that.

These changes would in effect mean that the cost would be shared between governments and private landlords. The government has promised to change the law to prevent rent evictions during the crisis, but also said that landlords should be able to collect any arrears afterwards, which merely stores up huge problems for the future. A rent cap plus a liveable income to cover it, would stop that prospect in its tracks, and ensure the cost is shared fairly between landlords and government. Council and housing association rents should mostly be able to be fully covered by this approach, but where they are not, social landlords – councils and housing associations – should receive a separate payment to make up the difference, so they don’t lose out.

As the government has already announced mortgage holidays, a tweak could be considered to reduce their income payment – but it’s probably best to keep things simple. It’s not possible to make things fair overnight. But we can make them fairer.

3. Cancel benefit debt

One highly effective way of quickly relieving pressure on the poorest would be to cancel benefit debts, including tax credit debt. More than half of people currently on Universal Credit are not getting their full payment because they’re paying back benefit debts and loans that arose mostly because of the delays and mess in the system. The average amount owed is £903 but some owe £5,000 or more. Debt repayments can currently take as much as 30% out of people’s benefits.

Last week’s budget cut this limit to 25% – but that is still far too high a proportion of an already low income, and it’s not even due to come into force until October 2021. Cancelling these debts outright is a far better solution in midst of a crisis that is going to go on for some time, as it will ease pressure immediately and begin to restore confidence in our welfare safety net. Some parents were put off going anywhere near the benefit system after their experience with tax credits, and are now facing the prospect of returning to that, with trepidation.

4. Pause collection and interest on unsecured debt

The government has given mortgage holders a break, with the offer of a three month mortgage holiday – they need to do it for other debts as well, including student debt and consumer debt like credit cards, overdrafts and catalogue payments. Banks have just increased their overdraft interest across the board to an eye-watering 40% which will store up a debt disaster if more people have to start ‘living in their overdraft’ – as 2 million people already do.

No-one should be incurring interest on debt, or being hounded by creditors and collection agencies at the moment. The government had already announced a ‘breathing space’ plan to allow those who were struggling with consumer debts to get 2 months where interest and enforcement action was frozen. They need to bring it forward right now.

Back to business as usual?

In taking any drastic action, we obviously need to think about what the world to look like in future, even as we ensure that people’s lives and livelihoods are protected in the short term. Current government support seems to be predicated on keeping certain strategic industries afloat at all costs. But as emissions and health-damaging air pollution drops dramatically, do we really want to go back to ‘normal’ afterwards? Many have suggested that forward planning takes into account the desperate need for a Green New Deal, not to mention the automation challenge to jobs that was already on its way, and it’s also worth bearing in mind (as David Graeber would remind us) that far too many people work in jobs that they don’t feel remotely engaged with (85%, globally, according to a Gallup poll).

As we all think about our families, loved ones, and social connections, perhaps exactly the time to ask ourselves what is really important. If people are guaranteed they’ll have enough money to live on, how might we want the world to look? How might we want to spend our time?

How many are utterly sick of being underemployed, broke, indebted, and in the precarity that comes from being classified as ‘self-employed’ to suit the whims of capitalists. To suit a neoliberal world that wants a desperate pool of labour to shoulder all the risk, and wants that pool atomised and hard to organise? Is this the normal we want to return to?

What about Universal Basic Services? UBI? And renationalisation?

There are other questions, of course, about both the crisis and the new normal that comes afterwards. Might we want to give income to everyone, not just those below a certain level? Might we want to think longer term about a less cash based economy, and more in the way of Universal Basic Services?

There are certainly some quick fixes in terms of basic services that we need here right now. We don’t actually have free healthcare for all in the UK right now. NHS charges for migrants are grossly unhelpful in a public health crisis and need to be scrapped, as do prescription charges in England. Internet access (both broadband and 4G, for those who rely on phones to get online) is going to be essential and there have been calls for it to be free, and for free energy bills (perhaps up to a reasonable usage cap). There’s definitely an urgent problem for people on card meters who may not be able to get out to top up. If rents and food are basic needs, should they be covered under Universal Basic Services too – either just now in the crisis, or going forward too?

There are thorny questions in such an approach, though. Most obviously, who should pay? And meanwhile, hard-up people just need to know that they will have enough to live on. Questions about services and utilities depends to some extent on thinking hard about what we want the world to look like after the crisis. If privatised utilities and services have profiteered, been let off massive tax liabilities, and failed to adequately invest in green energy, should they be funded by government to give people payment holidays, as Robert Chote of the OBR has suggested? If buy-to-let landlords have benefitted at the expense of younger generations (and those landlords’ basic income needs are going to be guaranteed like everyone else’s), should they be fully bailed out? What about other privatised utilities, like rail, and other big corporates, calling for massive bail outs right now? Should this be unconditional, or come with conditions about their duties to workers and the environment (and maybe even nationalisation) so that we can build a stronger, green economy going forward?

As many others have observed, this crisis has exposed the failures of the market economy and its attacks on workers’ rights and trade unions. 40 years ago, aircraft manufacturing workers came up with a workers control plan to make green technology and medical equipment instead – the Lucas Plan – but this was shut down by the bosses, and nixed completely when Thatcher came to power. Imagine if it hadn’t been. Instead, we have the egregious spectacle of profiteering, with people trying to produce equipment quickly being sued for copyright patent.

And the crisis has exposed the intense fragility of our current system, in terms of how unequally risk is now distributed, and who is exposed to it. Exponentially more even than in 2008, if we stay this vulnerable, we’ll be fully exposed to the disaster capitalists and the shock doctrine merchants.

Universal Basic Income (UBI) is another idea that’s in the mix, including amongst both Labour and Tory politicians. Of course it could be possible to give the kind of payments I’m talking about, not just as a liveable income guarantee for those on lower or no incomes, but as a payment to everyone. And right wing governments are offering sums of helicopter money – one-off cash payments to all – but this won’t be enough to live on for those who really need it. And as Gordon Brown said today, does Donald Trump really need $1,000 right now? UBI is a different system that would be difficult to introduce in a hurry, even some of its long-term advocates are pointing out. I’m fairly agnostic on UBI – everything depends on the amount being truly liveable for all. If the government wants to be more generous, on top of supporting the poorest AND giving the NHS every penny it can possibly use to address the coming health crisis, then that’s what they should do.

But those already on low and modest incomes must be the priority. It’s going to be pretty horrible. We have a moral duty to make sure it’s not inhumanly unequally horrible, too. If we fix what is in our power to fix, and fix it right, we might emerge from this global trauma with the seeds of a more humane and egalitarian society. And that’s got to be a hope to cling to, and a demand to organise around.

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