Sunak under pressure to fix UK welfare system as leave ends

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Rishi Sunak is under increasing pressure to repair the UK’s safety net as the government’s leave program ends, ahead of a winter in which some 6 million households will depend on benefits to pay their bills.

The Chancellor’s last-minute review of the employment support program that begins after the end of holidays on Saturday will help some of the 2 million people who still benefit from the initiative. The JSS will now offer a more generous wage subsidy than was originally envisioned when employees work at least one-fifth of their usual hours.

But unemployment is likely to rise sharply and spread beyond the ranks of low-paid workers initially affected by the pandemic. Sales have fallen near zero at many companies, even though they are legally allowed to remain open, while others brace for a long-term drop in demand.

Abi Dunn, a Manchester-based hospitality recruiter, said even businesses that had thrived until recently were now laying off core staff, with a clear trend over the past two weeks of layoffs among the highest paid employees in sales, innovation and marketing.

“These are their A teams, they thought these guys would never leave. . . now they have to start letting these people go, “she said, adding that companies that had fought to stay open, even at a loss,” were now considering shutting down, hibernating until they can see a future ”.

The online job site Indeed said two-thirds of a million workers had uploaded or updated their CVs in the month before their leave ended – and many were older or older, “which suggests that middle management positions are lost as well as junior roles dominated by young workers ”.

Those who fall out of work will find it difficult to find a new job. A study released this week by the Resolution Foundation, a think tank, showed that the rate of job losses in recent months was on par with previous recessions, but hiring has been much more deeply depressed. Additionally, people who lose their jobs in hard-hit industries tend to seek similar roles rather than looking for jobs in areas where there are vacancies, the research finds.

“The British labor market is traditionally known for its flexibility, its ability to create jobs. . . We are now seeing that this has slowed down considerably, if not stopped, ”Carolyn Fairbairn, outgoing CEO of CBI business organization, said Wednesday at an online event.

“It’s only right that as we move towards a more targeted approach to tackling the virus, our support is also becoming more focused,” Sunak said on Friday, justifying the move from the leave system to JSS.

This means that millions of workers facing pay cuts or job cuts will depend for all or part of their income this winter on Universal Credit, a social protection system that remains – even after a recent £ 20 hike. of the basic weekly benefit rate – “one of the weakest non-working income protection schemes among advanced economies,” according to Alfie Stirling, chief economist at the New Economics Foundation, a think tank.

About 5.6 million households received universal credit payments or labor tax credits in August, 1.6 million more than in January. The number is set to increase, low-paid workers who see their wages fall under the JSS and can benefit from supplements under the universal credit.

Mr Sunak argued that this would mean that many low-paid workers will receive around 90 percent of their usual net income, even working 20 percent of the hours.

But analysts said that would only be true for certain types of households, even those in the JSS. For those who have lost their jobs, Universal Credit is relatively generous for low-income families, but on average only replaces about a third of lost income – and as little as a fifth for some single adults.

“A lot of people on UC aren’t on JSS. . . it’s not an add-on, that’s all they’ll get, ”said Stirling.

The government has resisted calls from charities and unions to make permanent the £ 20 increase in universal credit, which will otherwise end next April. But if ministers can postpone this decision until next year, they will have to act sooner to protect certain groups from a drop in income.

IPSE, an association representing freelancers and entrepreneurs, says hundreds of thousands of people could suffer a “sudden, drastic and unsustainable financial blow” if the government restores the so-called “minimum income floor,” which limits benefits for low-income self-employed workers.

This was suspended at the start of the pandemic, allowing many self-employed workers who were not eligible for other forms of government support to claim universal credit, but the suspension ends on November 12.

Many people who claimed universal credit after the first nationwide foreclosure will also be approaching the end of the nine-month grace period after which their benefits could be capped. This policy has long been criticized for penalizing people with disabilities, single parents and families in areas with high housing costs.

Homeowners, who do not qualify for Housing Benefit under Universal Credit, could also be vulnerable as this weekend’s deadline for claiming vacation payment passes.

There is ample evidence that many households suffer from severe financial hardship. Local authorities are reporting an increase in requests for tax breaks, and debt charity Stepchange said this week that more and more people are asking for advice – with a growing share of they without work and receiving universal credit.

Karl Handscomb, a researcher at the Resolution Foundation, said that without changing the generosity of the system – particularly the minimum income floor and the benefit ceiling – “you will see a significant minority struggling seriously.

“Our social protection system is based on a dynamic labor market where most people can find a job in a reasonably short period of time,” he said. “Once you take it off, it cracks and collapses.

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