Covid-19 and Social Security – where now and where next?

11 June 2020

By Professor Jane Millar OBE (Professor of Social Policy in the Institute for Policy Research at the University of Bath)

Many people have been unable to work, or have lost their jobs, in the Covid-19 lockdown. The social security system is there to help people in such circumstances, to maintain income and to prevent destitution.

The numbers claiming support via social security or other schemes are astonishing. By mid-May there were eight million people on the Coronavirus Job Retention Scheme and 2.3m claims to the Self-Employed Income Support Scheme. By the end of May, over 2 million new Universal Credit claims had been processed. By April, 2.1 million people received unemployment-related benefits, an increase of over 850,000 over the past month. The estimated costs for 2020/21 are about £54 billion net for the Job Retention scheme, about £15 billion for the Self-Employed scheme, and about £8 billion for Universal Credit and related measures.

So, something of a new world, with millions more people being supported financially. The responses of the Treasury and the Department for Work and Pensions, and the dedication of front-line workers, have played an important role in ensuring the systems have been able to cope.

But, as with health services and social care, the Covid-19 crisis has exposed some major gaps in provision. These have required some immediate changes. This first involved new measures to help employers to retain workers: the Coronavirus Job Retention Scheme and Self-Employed Income Support Scheme both pay cash grants of up to 80% of previous income, up to a maximum. The standard allowance of Universal Credit and the basic rate of Working Tax Credit were increased by £1000 per year. Some rules were relaxed and processes streamlined, including the removal of waiting days for Statutory Sick Pay, and the suspension of face-to-face interviews for Universal Credit claims. Bradshaw and Bennett give more details of the new measures, which are all so far temporary. Many underlying problems and issues remain.

First, the UK no longer has an effective system of unemployment benefit. The Job Retention and Self-Employed income schemes are intended to keep people in work, and are not social security benefits in the usual sense. But in structure they are not dissimilar to the earnings-related unemployment benefits found in many European countries, which help to protect people from a substantial fall in income when they become unemployed. The UK has ‘New Style Jobseeker’s Allowance’, which is contribution-based, but is flat-rate, not earnings-related, and has not been uprated as part of the Covid-19 measures. As Rod Hick has pointed out, most (750,000) of the 850,000 new claims for benefits due to unemployment in March/April were for Universal Credit, not for New Style Jobseeker’s Allowance, even though some (perhaps many) would have been eligible. They may not have been aware of the option of Jobseekers Allowance or may have chosen Universal Credit because it pays a higher amount.

Second, the UK has generally focused on benefits as a safety net, not to maintain income but to meet basic needs. Concerns about financial incentives to work have kept our working-age benefits low in level, exacerbated by the heavy cuts under austerity measures. If you have no other income but benefits, then that benefit needs to be enough to live on, to enable you to keep your home, to pay your bills, to have enough to eat, and so on. There is much evidence that the level of support is not adequate for many people. The £1000 per year uplift in Universal Credit and Working Tax Credit has been warmly welcomed as relieving some of the financial stress and insecurity for some claimants. But it is probably still not enough. Some people are still excluded from any support including those with no recourse to public funds. And the additional costs for families with children have not been recognised.

Third, there are built-in inequities due to differing levels of support provided by different provisions. Some means-tested benefits – Jobseeker’s Allowance, Employment Support Allowance – have not been increased, and so remain at about £297 a month for a single person aged over 25 (less for a younger claimant). Universal Credit basic rate is about £410 a month for a single person aged over 25. The job retention/self-employment schemes pays up to £2500 per month, with no difference by age. Thus, as the Resolution Foundation shows, the median replacement rate (the amount you receive in benefits compared to previous earnings) is around 90% under the job retention/self-employment schemes compared with around 50% on Universal Credit. Many new claimants of Universal Credit are going to be unpleasantly surprised by the low amount, and by how far this falls below their previous income, and more so if the £1000 increase is not made permanent.

Fourth, because of the reliance on means-testing, UK benefits are generally based on the household and not the individual. This means that some people who become unemployed will not necessarily receive any financial support if they have a partner in work. Indeed this is the reason why some of the new Universal Credit claims related to Covid-19 have been ineligible. This again will be a nasty surprise for many people in the coming months, who will find themselves financially dependent on a partner, with no compensation for their involuntary loss of work. Conditionality is lifted at the moment, but if this comes back, then the nature and extent of the job search requirements – on both partners – may be another shock.

The research response has been speedy. Neville Harris and colleagues discuss the longer-term implications of these of these ‘urgent wide-ranging reforms’. There are new projects for example on social security and employment support and on low-income families, and additional questions added to on-going social surveys such as Understanding Society. These will all provide important evidence of the financial impact on individuals and families, and of the effectiveness of the support they receive. There will also be increasing attention to the wider questions about the purpose and structure of our social security system, including, for example, discussions about basic incomes and about the role of contributory benefits. We do not always need new data to explore the issues arising from Covid-19, as Tina Haux has pointed out, but we do need our social science knowledge, imagination and commitment.

With thanks to my colleagues, Fran Bennett, Rita Griffiths and Luke Martinelli

Visit the hub of the social science community’s response to COVID-19.

Professor Jane Millar OBE is Professor of Social Policy in the Institute for Policy Research at the University of Bath. Her current research examines the impact of Universal Credit on couples, focusing on labour market and family budgeting. She is a former chair of the Social Policy Association, and is currently chair of the Social Sciences Main Panel C for the Research Excellence Framework, 2021.

The perspectives expressed in these commentary pieces represent the independent views of the authors, and as such they do not represent the views of the Academy or its Campaign for Social Science.

This article may be republished provided you place the following statement and link at the top of the article: This article was originally commissioned and published by the Campaign for Social Science as part of its COVID-19 programme.