Yahoo Finance UK's weak welfare measures fail to protect poorest and low-income workers
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The UK’s porous welfare measures are failing to protect the poorest and low-income workers, a new study has shown.
According to data from the Resolution Foundation, changes to Britain’s social security safety net, since its post-war creation, have left the country poorly equipped to tackle poverty, or support people during periods of large economic disruption, such as the current coronavirus pandemic.
It also provides little assurance for those whose jobs are threatened by economic change, Resolution Foundation added in its Social Insecurity report, a joint project with the Centre for Economic Performance at the LSE, funded by the Nuffield Foundation.
The report notes that working-age social security spending has more than doubled since the creation of the modern welfare state, from 1.7% of GDP in 1948-49 to a projected 4.5% by 2026-27.
However, this extra spending has not been driven by more generous income support, which has consistently fallen further behind average earnings.
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Unemployment support, a core element of any social security system, is set to fall to its lowest real-terms value in over three decades this April, at just £77.29 ($105) a week.
In part to cope with such minimal income support, welfare spending on extra cost-based benefits, including housing and children, has risen.
Spending on housing benefit has risen fivefold since the 1980s, from 0.2% of GDP in 1980-81 to 1% in 2012-13. Child-related benefits have gone from being less than half as generous as unemployment benefits in 1977, to being 14% more generous by 2010.
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The growth of these costs-based benefits has also been a response to economic and social change increasing inequality in family earnings across Britain, the Resolution Foundation revealed.
The ratio between the earnings of the poorest and richest 10% of families has more than doubled since the 1950s.
However, the Foundation said that while the longer-term growth of cost-based benefits under both Labour and Conservative governments “helped some households cope with rising inequality in family earnings”, many relying on basic income support have been left behind.
This failure to support the poorest in society has seen child poverty climb from 27% in 2010-11 to 31% in 2019-20.
Meanwhile, the reliance on cost-based benefits rather than income support means that a single adult losing their job typically only receives 31% of their previous earnings — one of the lowest replacement rates of any advanced economy.
Resolution Foundation said these dual problems lay behind the chancellor having to take drastic action at the start of the pandemic by implementing the furlough scheme, and increasing unemployment support by over a quarter.
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The Foundation is calling on policy makers to reconsider the strategy of letting benefits fall ever further behind earnings.
“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, Karl Handscomb, senior economist at the Resolution Foundation, said.
“With even those cost-related benefits cut back over the past decade, we go into the 2020s with a porous safety net.”
