One in three people in the UK will be facing hardship by May

New report calls for the introduction of a minimum income guarantee to eradicate poverty.

According to a worrying report from the New Economics Foundation, 21.7 million people in the UK (1 in 3) will be living in hardship by the end of May and they will not be able to afford a decent standard of living.

Among this, 12.9 million people (1 in 5) would be at a high risk of material deprivation (below 75% of the Mininum Income Standard or MIS), should the £20-per-week uplift to Universal Credit be axed by the UK government.

The Joseph Rowntree Foundation and Centre for Research in Social Policy calculate the Minimum Income Standard (MIS) to provide a threshold for the “minimum socially acceptable standard of living”, and this is used to calculate the actual living wage. This is distinct from poverty thresholds, which is a relative indicator of wealth.

Based on the study, it has been found that if the £20-per-week uplift of universal credit is extended by six months, there will be 1.1 million new people beyond the MIS, which is over and above the 1.2 million people who were living beyond the MI level and at high risk of material distress in September 2020.

By November 2021, when the universal credit uplift is likely to stop, the report suggests that a further 1.2 million people will be living below the MIS relative to September 2020, and another 1.8 million people will be living in households where wealth is just below the MIS.

The report finds that despite improved general economic conditions and lower rate of unemployment, the elimination of the £20 additional uplift after six months would raise the number of individuals at risk of material deprivation.

The number of people living in households whose income is less than 75% of the median income will rise by 600,000 between May 2021 and November 2021 if the uplift is only continued for 6 months.

The results make use of the most current evidence about labour markets and the economy, as well as the new Bank of England estimates for the second quarter of 2021 (April to June) and the fourth quarter of 2021 (October to December) to include a forecast of the number of people who will slip below the MIS in the spring and fall of this year.

According to the projection, the number of households with income below 75% of the MIS, who are four times more likely to suffer material deprivation, is expected to be one million.

Hardship will be experienced around the UK if the £20 uplift is stripped away, the study suggests.

The new labour market figures published this month showed that, while last year the unemployment rate was 1.3 percent higher, in the last quarter of 2013 the rate was 5.1 percent higher. When the furlough is finished in April 2021, the Bank of England estimates that unemployment will increase to 7.8% in April-June 2021.

Millions of families have come to rely on our social security programmes to provide wages and place food on the table. According to the latest estimates, there will be 5.9 million individuals on universal credit by December 2020.

NEF contends that, at a bare minimum, the £20 rise in should be given to those on Universal Credit or to those who earn Working Tax Credit, and in addition extended to those earning legacy payments that do not actually have access to it.

Still, reflecting the magnitude of the number of those suffering even with the uplift, this means that the reforms adopted aren’t appropriate to tackle the financial challenge the UK is facing.

NEF is advocating a living income that starts with the introduction of a new minimum income guarantee, which is also known as a ‘universal basic income’ (UBI), to eradicate poverty.

In the case of a worldwide pandemic, anyone who wants help will earn at least £227 per week, which will boost the UK economy and bring resources back into local areas.

Sarah Arnold, Senior Economist at the New Economics Foundation, said: “There seems to be light at the end of the tunnel in this pandemic but we are by no means out of the woods yet.

“If the public health crisis abates as we all hope it will, it will lay bare the true extent of the crisis in living standards that is now a reality for millions of families.

“NEF’s new analysis shows the devastating impact the crisis is having on people across the country and even if the economy starts to recover this year, we will still see an increase in the number of households falling into extreme hardship. This isn’t right – we shouldn’t be leaving anyone out of the recovery.

“The £20 uplift and the furlough scheme were a recognition by the government that our current safety net is insufficient to protect livelihoods and incomes.

“It is time to build one that does, and that is fit for the future. Part of this should be a Living Income to ensure that people have enough to live, not just survive.”

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