The UK government’s responses to the coronavirus crisis so far has created a clear divide between those who are protected by the new income protection schemes, and those who are not.
Those qualifying will be protected under the government’s Job Retention Scheme (JRS) for employees and the Self-Employment Income Support Scheme (SEISS) for the self-employed, which protects 80% of incomes up to £2,500 per month. But millions are not protected under these schemes, or must wait months until this support arrives.
And it is the most vulnerable with the fewest savings – low paid, precarious workers, who are least likely to have their incomes protected. Recent research has found that 5.6 million workers are at high risk of losing their jobs and being unable to access government support schemes.
Those not protected must currently rely on our broken and desperately underfunded benefits system, which will provide a fraction of the level of support provided by the government’s job support systems. A single adult will only receive £90 a week to live on under Universal Credit (excluding modest additional payments for housing and help with the cost of having children) – which amounts to less than a third of the income of even a minimum wage worker.
It is very difficult to live on such a meagre sum, as those who have used the benefits system for years already know – but particularly difficult for those who have suddenly lost their jobs as a result of this crisis, who will have had no time to plan or control their outgoings. The truth is that few of the hundreds of thousands of families who have had to live on Universal Credit really can, which is which we have seen a huge rise in the use of foodbanks and credit cards to meet basic needs.
And that’s for those eligible for support from the social security system. Migrants with ‘No Recourse to Public Funds’ cannot receive any support.
How are those not protected under the government’s current schemes supposed to meet their basic living costs? We urgently need further protection to prevent immediate hardship for those who need it. We need a mechanism to get cash into people’s pockets fast, which reaches the most vulnerable first.
A consensus is emerging amongst many organisations – including the Trade Union Congress (TUC), Citizens Advice, the New Economics Foundation and openDemocracy – calling for a much more generous income for those currently left out of existing schemes, which gets rid of the conditionalities and requirements for new benefits claimants to jump through a dizzying array of hoops.
Common to these calls is the demand for a guaranteed income, available to everyone who applies for it. It should be sufficient to fully cover the basics people need to live and be fully unconditional – so it should be available to anyone who applies for it. In order to get it to those who need it as soon as possible, it should not be means-tested at the point of application.
At NEF we have proposed a new Minimum Income Guarantee (MIG), a substantial and immediate reform of the existing social security system. For existing social security system claimants, the basic level of Universal Credit and equivalent ‘legacy benefits’ should be raised to an amount that sufficiently covers living costs (we suggest £221 per week, excluding rent, equivalent to JRF and CEPR’s estimate of the minimum income standard). An income at this level, combined with a rent or mortgage holiday for those with housing costs, is the amount people actually need to afford the basics. The additional elements for caring responsibilities or to support those with disabilities would be preserved. This means the millions of people (many of the poorest and most vulnerable) already on the system would get an immediate uplift.
But anyone who feels they need it could apply for this guaranteed income, and would receive it. Applications would be made through the advance payment system for Universal Credit, which would bypass the usual five-week wait for the first payment, enabling the Department of Work and Pensions to process claims much faster than they are currently and helping them deal with the additional hundreds of thousands of claims they are already getting, as well as the millions more they are expecting.
This means that the single adult working minimum wage who under existing Universal Credit allowances was left with only a third of their income, would now get three quarters of their income if they lose their job – much more equivalent to the government’s job protection scheme.
Even those covered under the government’s existing schemes could apply for it, if they need it to tide them over until payments from those kick in (due June at the earliest). But those who do subsequently receive such support would have payments under the MIG deducted from the final amount. And any higher earners who claimed the MIG to get them through this crisis period would be asked to pay some of it back in the next year through tax contributions. (We suggest any proportion that takes people’s individual earnings above £2,500 per month should be paid back.)
This scheme is very similar to a universal basic income (UBI) – and indeed many would consider it a partial UBI in that it is an unconditional cash payment available to all. Its aims are similar – to get cash in people’s pockets immediately, and reducing conditionality attached to payments to ensure it is available to all who need it. Some proposed versions of UBI even include a provision, as this proposal does, for retrospective means testing so that higher earners ultimately receive a smaller payment.
The key difference here (although since there are many versions of UBI, others may disagree) – is that rather than it being an automatic payment for all, you must apply for it and income over a certain threshold would have to be returned through the tax system. It must of course be accompanied by a comprehensive and sustained government campaign to publicize and encourage people to apply.
A UBI, in its purest sense, would give a cash payment to everyone, including those who do not particularly need it who would likely just save it, inflating the assets of the rich, whilst everyone else would use it to get by. And it would be expensive to give cash to everyone. We need to make sure that no one suffers extreme economic hardship as a result of this crisis, and that everyone has enough cash in their pockets to meet the basic living costs – housing, bills and food. But we also need to ensure that the public services that provide the other essentials we need such as healthcare and social care are properly funded. We could give cash to everyone, even those who don’t need it – but a better solution might be to provide cash to all those that feel they do need it, and spend the rest on services that we all need to use.
At the start of this crisis, the government had the choice to support people through the existing employment and benefits structures, or create something new. Reasonably, they chose to support people through existing structures – ensuring that the productive capacity of the economy (e.g. businesses) is also protected as far as possible. But the millions who are already falling through the gaps of existing structures also need support.
We need an income guarantee for all now.