Government cuts threaten employment recovery, charities say

The number of employees on company payrolls jumped back to pre-pandemic levels in August, Office for National Statistics data showed, but anti-poverty charities warned the government not to withdraw support measures at a critical time.

Payroll employees climbed 241,000 to 29.1 million in August, lifting UK employment to February 2020 levels — although London, Scotland and the South East have not yet recovered to pre-Covid rates.

The employment rate rose 0.5 percentage points to 75.2 percent in the three months to July, while the unemployment rate slid 0.3 percentage points to 4.6 percent.

The employment rise comes on the eve of the government’s planned withdrawal of several coronavirus support measures. This includes a £1,040-a-year cut to universal credit — the largest overnight benefit cut since the Second World War — and September’s axing of the furlough scheme. The end of Covid support schemes, plus the rise of national insurance hitting low-paid workers and incoming energy price cap hikes, have provoked a backlash from anti-poverty organisations.

Balbir Chatrik, director of policy at Centrepoint, a charity that supports homeless young adults, welcomed the rise in employment but said: “There is still a long way to go before the number of unemployed young people returns to pre-pandemic levels and, until we get back to some normality, the government must continue to ensure the necessary support is in place for those who need it.”

The number of unemployed people aged 16 to 24 was 525,000 in the three months to July, Centrepoint said, an 8 percent increase from the same period in 2019.

“The easiest way to tackle that is to keep the £20-a-week universal credit uplift, a lifeline for those young people who economically speaking have been the hardest hit by Covid-19,” Chatrik added.

Meanwhile, the number of job vacancies hit a record high of over 1 million in the three months to August, soaring almost 250,000 above pre-pandemic levels.

Ministers are using the employment data as justification that their plan is working. “As we continue to recover from the pandemic, our focus remains on creating opportunities and supporting people’s jobs,” Chancellor Rishi Sunak said.

But Rebecca McDonald, senior economist at the Joseph Rowntree Foundation, said while the rise in employment was good news, the jobs market is still plagued by uncertainty — as the furlough scheme is wound down on September 30 and companies may be unable to bring back all staff.

“It therefore makes no sense for the government to proceed with the cut to universal credit in just a few weeks’ time,” McDonald said.

She added: “The increase in universal credit was brought in as a recognition that the previous rate of social security was not enough to provide people with a decent standard of living. That has not changed. In fact, bills are going up and the cost of essential items has risen further.”

McDonald said the cut will throw both working families and those not working due to illness or disability into “unnecessary hardship,” and that the government is creating a “false trade-off” between work and universal credit.

“Ministers know this, and it’s not too late for them to change course.”