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Opinion

What does the Budget mean for poverty in the UK?

Dave Innes, head of economics at JRF, says the Chancellor fell someway short of what he needed to deliver at the 2021 Budget.

When he delivered his Budget yesterday, the Chancellor promised to “continue doing whatever it takes to support the British people and businesses through this moment of crisis”.

But JRF’s analysis shows that ultimately, more people will be swept into poverty in the face of continued economic uncertainty and inadequate support.

Before the Budget, JRF set out five tests to judge whether the measures announced would deliver for people living poverty. Our analysis shows that the choices made by the Chancellor on social security, housing, and the economy do not pass those tests and risk pulling people into poverty as a result.

1. Has the Chancellor extended the £20 uplift to Universal Credit and Working Tax Credit for at least another year?

The Government’s decision to cut Universal Credit and Working Tax Credit in 6 months’ time – just as the furlough scheme ends and unemployment peaks – will pull 500,000 people including 200,000 children into poverty as we head into winter.

The OBR’s latest forecasts show that unemployment is expected to increase by a further 500,000 people between now and the peak towards the end of the year. Despite that, the Government has chosen to cut the main rate of unemployment support to its lowest level since 1990. This makes no sense, and leaves millions of families who are already struggling once again dreading a cliff-edge cut to their incomes.

2. Has the Chancellor announced measures to protect jobs and help the unemployed back into work?

The decision to extend furlough until the end of September is welcome and will continue to protect more jobs until the economy reopens. It is important that there is flexibility in the timings set out for unwinding the scheme, so that they can adapt to any potential changes in the roadmap ahead.

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The Government did not add to the employment and training support programmes already announced last year and gaps remain: particularly for people who need to retrain in order to change sectors.

3. Has the Chancellor announced measures for England to support those in rent arrears and at risk of eviction?

The Chancellor was silent on support for the 700,000 households already in rent arrears. The Local Housing Allowance will be frozen from April too, piling further costs onto renters on low incomes as the link between local rents and support on offer is broken again. Renters are a group that have been hit hard by the pandemic, yet the Budget did nothing to fix the serious and growing issue of rent arrears.

Instead, the Chancellor extended the ‘Stamp Duty Holiday’ and launched a new 95% mortgage guarantee scheme. These policies will compound the UK’s housing crisis, driving up house prices and making it harder to address the issues faced by people in poverty.

4. Has the Chancellor set us on a course for recovery that leaves no one behind?

Most of the new spending announced is targeted at supporting incomes while pandemic restrictions continue and as the economy begins to reopen, with little new fiscal stimulus focused on restoring growth afterwards. The Chancellor is instead gambling on a quick recovery driven by consumer spending and increased business investment.

The path the Chancellor has set also risks an unequal recovery that will lock poorer households out. A spending-led recovery would be driven by wealthier households who have built up savings during the pandemic, while the bottom 40% of households have depleted savings or gone into debt to keep their heads above water. That also means that wealthier areas will see a faster recovery.

The Government has promised to ‘level up’ the country, but beyond some piecemeal funding and policies, this Budget did little to flesh out an overarching strategy to address regional inequalities.

5. What does the Chancellor’s Budget mean for poverty in the UK?

In this Budget the Chancellor pledged to ‘meet the moment’. We needed to see bold policy that ensures a strong recovery to match the compassionate moves taken to protect people’s incomes at the start of the pandemic.

The Chancellor should have made the choice to build a different future. One that is characterised by good jobs and investment in people and their skills, where housing is genuinely affordable and where social security is there for us when we need it. Instead, the Budget fell far short of what the country requires and of the values we share.

Dave Innes is head of economics at JRF.

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