Zoe Charlesworth and Megan Mclean, Policy in Practice, have analysed the impact of the new measures announced so far by the government to show how they will help households hit by Coronavirus (COVID-19).
The economic impact of the Coronavirus (COVID-19) pandemic was likely to be so significant that the government response had to match it. The measures the government has put in place up to and including Friday 20 March now make it more likely that people will take the necessary steps to control the virus because they know they’re more likely to stay in work and able to meet their bills, and that they will be supported financially by this government.
Policy in Practice is here to help
Policy in Practice delivers welfare support through software, advice and analytics. The team has responded to the crisis by focusing on how we can support others.
- Your income and Coronavirus (COVID-19) is a free resource for people to know what welfare support is available to them. This has been open to comments, which we are responding to in an FAQ style, so the most common questions are answered.
- The Better Off Calculator has been updated with each of the changes as they were announced. We saw usage of the free calculator double and then double again in the first few days of the outbreak, highlighting how concerned people are about their finances.
- For our local authority data analytics clients, we have identified the six key groups likely to be impacted by the measures put in place to contain Coronavirus (COVID-19). These insights have been useful to senior leadership teams planning their response to households hit by Coronavirus (COVID-19), to better target support.
Findings of our analysis into how the new measures will help households hit by Coronavirus
As a result of the changes to Universal Credit, the number of households in receipt of Universal Credit whose bills are higher than their monthly income will fall from 16% of households to 10%. The average increase in Universal Credit awards as a result of changes coming into effect from April 2020 will be £98/month, an increase of 7.3%.
The impacts of the three main changes announced up to Friday 20 March 2020 are examined below.
1. From April 2020 the basic allowance in Universal Credit and Tax Credits will increase by £20/week
- A single claimant aged over 25, and not working, will see their Universal Credit increase from £317/month to £410/month from April 2020, or from £499/month to £595/month for a couple. This is an increase of over £90 per month or 29%.
- This rise more than covers the loss in real income caused by the benefits freeze for the standard allowance but doesn’t apply to other elements of Universal Credit which have been frozen from April 2016 to April 2020, introduced as part of austerity measures.
2. To support private renters the cap on rental costs, the Local Housing Allowance (the LHA), will increase to align with the 30th percentile of local rents
- The increase in benefit support as a result of this change will vary across local authorities, for example, rental support will increase by 21% in Manchester and 2% in Sunderland.
- On average, private renters will see awards increase by an average of £123/month (8.4%).
- The proportion of private renters with Universal Credit awards that are less than their outgoings falls from 13% to 7%.
3. To support the self-employed, Universal Credit awards will be based on actual income rather than a notional income (the Minimum Income Floor)
- On average, self-employed households will see a significant increase in awards of £398/month (28%).
- The proportion of self-employed households with Universal Credit awards that are less than outgoings falls from 44% to 7%.
- Support for self-employed households remains considerably less than for employed households who are protected under the Coronavirus Job Retention Scheme. A single-earning family with one child, previously earning £30,000/annum would see a 17% reduction in take-home income if they were an employee supported by the Coronavirus Job Retention Scheme and an 84% drop in income if they had previously been self-employed and were now supported by Universal Credit
- Self-employed households with over £16,000 in savings who can no longer work due to economic conditions will receive no support through the welfare system.
A welfare system we’ll want to keep
While these measures are timely, significant and very welcome right now to support households hit by Coronavirus (COVID-19), this report asks important questions about the type of welfare system we want in place when the extraordinary situation is over.
We call for:
- The increased generosity of the welfare system to be maintained after April 2021 to ensure we have a welfare safety net suitable for all.
- The savings limit in Universal Credit to be suspended for the next twelve months, and reassessed thereafter, particularly in relation to the self-employed.
- Changes to introduce greater flexibility into Universal Credit, including backdating up to a month under reasonable circumstances, allowing others to act on behalf of the claimant, a separation of payments from the assessment of the monthly award, and real-time responsiveness and flexibility to changes in personal circumstances.
We are optimistic that either as a result of this crisis or to create a clean break from the past, the government recognises that people living in the UK need a welfare system that works for all of us – one that can provide an anchor strong enough to help us cope with the challenges ahead.
Free webinar: Coronavirus and tackling vulnerability
Thursday 26 March at 10:30 – 11:30
Join Deven Ghelani and Frank Curran, RedQuadrant, as we explore the impact COVID-19 may have on your organisation’s most vulnerable residents, and what actions you can take.