Government Covid response policy has insulated many families from poverty. In an attempt to mitigate some of the financial impacts of the Covid-19 crisis, the Government has introduced a range of financial support for families and businesses. These include a temporary increase of £20 a week to Universal Credit and Working Tax Credits and the suspension of the Minimum Income Floor (that applies to self-employed people claiming Universal Credit).
We estimate that these policies alone protected some 840,000 people from poverty in Quarter 2, 2021. In other words, without these changes, 840,000 more people would have been in poverty in Q2 2021 than was actually the case.
The Government’s JRS and SEISS schemes as well as wider support for businesses and the economy, will have protected many more on top of this figure.
This September 2021 briefing presents original analysis from the Legatum Institute using the Social Metrics Commission’s approach to poverty measurement to demonstrate the insulating effect that Government policy has had on poverty throughout the Covid-19 pandemic and the risks that future changes to social security poverty pose for poverty. It builds on our previous work on this issue, which provide more detailed methodological notes.
The results that follow should be regarded as our best assessment of the likely impact of changes to Universal Credit (UC) and Working Tax Credit (WTC), in terms of the insulating affect they have had. All of our modelling assumes that the Government’s wider support programmes including the Coronavirus Job Retention Scheme (JRS) and Self Employment Income Support Scheme (SEISS), are in place.
The need for this analysis is clear; the survey data that underpins the measurement of poverty in the UK and covers the pandemic period will not be available until 2022. However, important decisions on the future of social security policy are currently being taken without a full understanding of the potential poverty impacts.
As such, this briefing presents the results from a “nowcasting” exercise. This uses the most up-to-date data on employment, earnings and Government policy available (including the Coronavirus Job Retention Scheme (furlough scheme) and its likely distribution amongst different groups of employees), along with a range of assumptions to model poverty in Quarter 2, 2021. We do this in two ways, both for Q2 2021:
- With the £20 uplift in UC and WTC and the suspension of the Minimum Income Floor (MIF) for self-employed people on UC in place; and
- Assuming that the increases in UC and WTC are reversed and the MIF reinstated.
The difference in the results between the two scenarios shows how many more people would have been in poverty in Quarter 2 2021, without changes to UC and WTC made during the course of the pandemic. They also provide an indication of the potential poverty impacts of the removal of the existing levels of support in October 2021.
More detail on the assumptions used in this, and our other scenarios, along with full results for each scenario can be found in the main body of the report. Further detail on how our modelling approach works and the background to the Legatum Institute Policy Simulator, can be found in our earlier report.