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Report warns ‘porous safety net’ leaving society’s poorest close to destitution

People receiving unemployment benefit on its own are receiving only slightly more than would tip them into destitution, a report has warned.

The welfare system is “almost unrecognisable” to that created after the Second World War following William Beveridge’s seminal report, the Resolution Foundation said.

The think tank said that, while working-age social security spending has more than doubled since the creation of the modern welfare state, income support has consistently fallen further behind average earnings.

People receive very low levels of basic income support, with a “porous safety net” which favours lower-income families above single adults by helping with extra costs such as housing and children.

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The authors say “too much” of the work in supporting incomes is done by these extra benefits.

They say: “That strategy in itself has been undermined by recent cuts to the way that support is provided to those with children and to renters.

“But it is also unsustainable to let benefits for groups who do not qualify for the top-ups fall to near-destitution levels.

“If tackling the UK’s legacy of high inequality and poverty is remotely part of new economic strategy for 2020s, then policy makers will need to reconsider this approach.”

The Government said the current system offers a safety net with “vital employment support”, while the most vulnerable can get extra help.

The report – Social Insecurity – is a joint project with the Centre for Economic Performance at the London School of Economics, funded by the Nuffield Foundation.

It said unemployment benefit in 2022-23 will be at its lowest level, in real-terms, for three decades.

This is only slightly above an estimated destitution income level of £70 per week, and stands at around 14% of average earnings – half the level it was in the 1970s.

The report said the UK’s record on living standards for the poorest of society has been “terrible” since 2003-4.

It said a direct consequence of the low basic level of benefits is that earners without additional needs have low protection if they become unemployed.

This was highlighted by the coronavirus pandemic, with the creation of the furlough scheme revealing the “limitations” of the system, and the £20 Universal Credit uplift “in part a recognition that benefit levels had fallen too far”, the report says.

Karl Handscomb, senior economist at the Resolution Foundation, said: “Our social security system has seen huge change over the past 75 years, leaving us with a benefits system that makes little attempt to provide basic levels of income support, but doing more to support households with specific costs like housing and children.

“With even those cost-related benefits cut back over the past decade, we go into the 2020s with a porous safety net.

“The result is the poorest members of society are being left further behind, while many are left with little by way of insurance if their jobs are threatened by economic change.”

Alex Beer, programme head at the Nuffield Foundation, added: “As this research shows, over time the protection given to people who lose their jobs has fallen to a level that only just enables them to avoid destitution and that is damaging not only to the people affected but also to the ability of our society to respond to economic change.”

A Government spokesman said: “Our welfare system offers a safety net while providing vital employment support to help claimants into work and towards financial independence.

“We know work is the best route out of poverty, that’s why our Plan for Jobs is supporting people across the country to boost their skills and take the next step in their careers.

“Working families on Universal Credit are seeing on average £1,000 more a year in their pockets and we’re increasing the living wage again in April by 6.6% to £9.50 an hour – £1,000 a year for a full-time worker.

“For the most vulnerable, including those who can’t work, additional support is available through schemes such as the Warm Home Discount and our £500 million Household Support Fund.”

Shadow work and pensions secretary Jonathan Ashworth said: “This is yet more damning evidence of the cost of the living crisis facing working people thanks to 12 years of Tory incompetence.

“With heating bills rising and punishing tax increases on the way families are set to be hit hard with many at risk of sinking further into poverty and destitution.

“Ministers should follow Labour’s plan and cut VAT on energy bills and expand the Warm Home Discount to offer real help to families.

“And the next Labour government will tackle poverty, and fundamentally reform social security to and support families, with respect, security and prosperity at the heart of our approach.”