The think tank said in parts of the UK one in three households would experience losses of £ 1,000 a year unless Sunak rethinks and continues with the financial aid introduced at the start of the Covid-19 pandemic .In its analysis of the Treasury’s winter jobs package, the think tank said the flaws in the design of the new employment support scheme meant unemployment would rise over the next few months, leaving more people dependent on the benefit system.
He said employers had little incentive to raise the wages of those who worked part-time because it was cheaper to employ one full-time worker than two part-time workers. A “major tightening” in living standards concentrated in areas of the country with a high proportion of low-income households is likely, he added.
The planned withdrawal of the £ 20 per week increase in tax credits and universal credit would lead to a drop in the average income of the bottom half of the population by £ 600, an average calculated by including retirees and others who do not would not be affected by the change.
In Scotland, southern England and the East Midlands, around one in four non-retired households would lose more than £ 1,000, rising to one in three in Northern Ireland, Wales, the West Midlands and the north of England.
“With the Chancellor’s emergency aid reducing, but far from curbing, a major increase in unemployment over the coming months, households are now facing pressure on living standards from which they have been largely protected until now. now in this crisis, ”the think tank said.
“Those who gain access to universal credit will not only see a lot of big cuts to their income, but the Chancellor yesterday missed the opportunity to avoid another shock by extending the temporary boost to universal credit beyond March.”
He added that the £ 20 per week increase reflected the fact that unemployment aid was insufficient when Britain entered the crisis and – without the increase – would be insufficient in the future. Ending the top-up would mean cutting disposable income by around £ 8bn in 2021-2022, hitting groups and places that needed government help to support spending and economic recovery in 2021-2022.
Torsten Bell, Managing Director of the Resolution Foundation, said: “As Britain faces dangerous jobs next month as the job retention program comes to an end, the Chancellor has rightly intervened. to announce new emergency aid to help businesses and workers period of rising infections and unemployment.
“But while the Chancellor has rightly sought to create a reduced European-style work program, flaws in design mean the new employment assistance program will fail to deliver on its promise to significantly reduce rising unemployment . These mistakes could be corrected by removing the ill-targeted £ 7.5bn job retention bonus and using those funds to ensure the new support scheme incentivizes companies to cut hours rather than jobs.
“Although households have so far been protected from the worst economic consequences of the pandemic, that is about to change. The rise in unemployment ahead will cause a major squeeze in the standard of living of families this winter.