The economic fallout of coronavirus pandemic could leave 1.1 million more Brits under the poverty line by the end of the year, including 200,000 children, a new analysis by a British think tank showed on Thursday.
Without government intervention, this could increase the number of British children living in poverty by almost 5%, to 4.5 million, according to the analysis by Institute for Public Policy Research (IPPR), a progressive think tank.
Henry Parkes, a senior economist at the IPPR, said: “Our modelling shows that the government must do more to prevent rising poverty, now and in the future. Struggling families need the government to step in and boost the incomes of those who lose their jobs at this difficult time.”
The IPRR analysis is based on the Bank of England’s estimate that UK unemployment will reach just under 10% by the final quarter of this year.
The increase in child poverty is expected to be driven by a fall in income for 800,000 households with children. Even parents who manage to keep their jobs will find it difficult to work so long as schools are either closed, or open irregular hours due to the pandemic.
The IPPR recommended wide-ranging changes to the welfare system to avoid these outcomes, including removing the two-child limit and benefit cap.
The think tank said that increasing child benefits by just £5 ($6) per week per child could completely avoid the expected increase in child poverty, and actually lead to a slight fall.
The IPPR called for these measures to be included in the chancellor’s summer economic stimulus package.
Clare McNeil, an associate director at the IPPR, said: “This analysis shows that hundreds of thousands of families and their children who may have been ‘just about managing’ before Covid now face being plunged into poverty.
“The government must apply the same level of ambition it had for supporting businesses and workers in the early stages of this crisis, to prevent a new generation of children and their families falling into poverty through no fault of their own.
“The chancellor must include in this summer’s stimulus a package of measures to support families alongside funding for physical infrastructure and job creation. This should include removing the Universal Credit austerity measures, supporting family and carer incomes and investing in childcare to open up more options for parents to return to work.”
Former chancellors weigh in
Three former British chancellors spoke at a hearing with the House of Commons Treasury Committee. They warned that the UK should expect to see 1980s levels of unemployment.
British unemployment almost hit 12% in 1984 under former Prime Minister Margaret Thatcher who de-industrialized the country.
Alistair Darling was the last Labour chancellor serving between 2007 and 2010 under former Prime Minister Gordon Brown. He led Britain’s response to the 2008 financial crisis.
“We need to get ourselves into the frame of mind where we’re thinking about 1980s levels of unemployment,” he said.
“Government needs to be planning. Let’s just assume things are going to be worse – it’s better that it’s good and well – but don’t leave it too late because it does take a long time to put these things in place,” he said.
Darling’s successor in No 11, where chancellors live next to the British prime minister at No 10, was Conservative George Osbourne. He served between 2010 and 2016 under former Prime Minister David Cameron, and was the architect of Britain’s austerity program.
“There will be loads of people in businesses that have gone bust that aren’t going to return, and people who are coming off furloughs into unemployment. That is going to be a big social challenge, and of course economic challenge, for this government,” he said.
Osbourne’s successor was Conservative Phillip Hammond who served between 2016 and 2019 under former Prime Minister Theresa May.
Both Hammond and Darlin warned against austerity to tackle rising government debt, and instead called for pro-growth policies.
“In the recovery phase, the next two years, where the debt as percentage of GDP is not the primary concern we should be addressing,” Hammond said.
Osbourne had a steelier point of view: “Sadly we are poorer than we thought we were, and either we’re going to have to raise more in revenue or spend less than we were planning.”
All three former chancellors agreed, however, that no-deal Brexit was a risk that must be avoided.
Hammond called for a “quick and dirty” deal, with Osbourne saying the UK and EU could most likely agree a limited deal to avoid “going off a cliff.”
Darling did not mince his words: “No-deal would be absolutely disastrous. With everything we’re going through with Covid you’d have to be mad to want to end up with a situation where you erect huge trade barriers and tariffs just at the time you hope your economy might be beginning to recover.”
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