Having suffered one of the biggest economic declines of all times, there is much talk of how a predicted rebound. But the widely used GDP measure to describe the fall and rise of the economy, hides as much as it reveals.
Now, more than ever, it's failure to reflect the real life experiences of millions of poorer people, means their experiences are more like to be ignored by both policy makers and the wider public.
The Big Rise In Inequality: We now have the highest level of income inequality than we have had for the past decade[1].
How Lockdown Hurts the Poor: It has been made worse by how the lockdown has affected different communities. While the richer families have saved by not spending on restaurants, holiday and other entertainment, the poor are most likely to have been affected by job losses. Over-one-in-three (36 per cent) low-income households with children have increased their spending during the pandemic so far (rising to 37 per cent during the first lockdown).[2]
First, parents identified that having children at home 24 hours a day led to higher food and energy bills, while the need to entertain them during the lockdowns, in place of activities such as visiting families and public libraries, has brought additional costs.
Second, parents identified additional costs associated with home-schooling, such as acquiring laptops, paying for internet access and obtaining additional study materials.
Third, families noted that the cost of buying food had risen, due to the reduction in store promotions, and because the need to shield has forced many to use more expensive home delivery options, while the need to avoid public transport means those without access to a car have had to use more expensive shops closer to home.
The Poor Are Sicker & Die Earlier: Males living in the most deprived areas of England can expect to live 18.9 years less in “Good” health compared with those in the least deprived; with the gap at 19.4 years for females[3]. Deprivation is highly concentrated in certain areas of the UK with the most deprivation in parts of Cheshire, Lancashire and Yorkshire and parts of Lincolnshire, Essex and Kent.
The April Budget Made Things Worse For The Poorest: In the budget the Chancellor said that Universal Credit would be cut by £85/month (£20/week) in the Autumn. This is because the temporary uplift in Universal Credit to help people over the COVID crisis, would no longer apply.
Imran Hussain of Action for Children said: “There’s no faster way to push more children into poverty than by snatching £20 a week out of the pockets of our country’s poorest families.”
Helen Barnard, Director of the Joseph Rowntree Foundation, said “It is unacceptable that the Chancellor has decided to cut the incomes of millions of families by £1040-a-year in six months’ time.”
Debt Hiding a Bigger Problem: The Bank of England has warned that aggregate statistics on income and spending mask substantial variation in the experiences of different households. It claims that 10% of mortgage borrowers had taken a mortgage payment holiday in April, according to our survey results. Data from UK Finance suggests this figure rose to slightly over one in six mortgages in June.[4]
So when the payment holidays end and the debt becomes due, we might expect a big blow to household finances as they suddenly find they have bigger debts which are now due.
Hiding Behind The Curtain:
On average, people are paying off debt but hiding behind the curtain of the headline figures are millions suffering from a collapse in their finances. According to the charity StepChange, millions of people have fallen behind on rent, bills and debt repayments, while destitution levels are expected to double in the wake of the crisis – with an estimated 2 million families likely to struggle to make ends meet, amid the coronavirus recession.
Almost 9 million people, many of them among Britain’s poorest, were forced to increase their borrowing last year to cope with the pandemic.[5]
Sources:
[1]https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/householdincomeinequalityfinancial/financialyearending2020
[3]https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthinequalities/bulletins/healthstatelifeexpectanciesbyindexofmultipledeprivationimd/2016to2018
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