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Business News/ News / World/  One of world’s least generous safety nets awaits UK unemployed
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One of world’s least generous safety nets awaits UK unemployed

Chancellor of the Exchequer Rishi Sunak’s decision to end blanket aid for jobs in favor of a policy that supports only viable roles has sharpened the issue

Britain's Chancellor of the Exchequer, Rishi Sunak, leaves a television studio in London, Britain (REUTERS)Premium
Britain's Chancellor of the Exchequer, Rishi Sunak, leaves a television studio in London, Britain (REUTERS)

Millions of Britons at risk of losing their jobs because of the coronavirus pandemic face one of the most dramatic losses of income in the developed world, increasing pressure on the government not to scale back emergency welfare next year.

Analysis published by the Institute for Fiscal Studies Friday highlighted the perils of the shift from preserving jobs to allowing the welfare system to take the strain of protecting incomes. Many families will fall into the safety net for the first time as companies adjust to the new reality of the pandemic.

Chancellor of the Exchequer Rishi Sunak’s decision to end blanket aid for jobs in favor of a policy that supports only viable roles has sharpened the issue, leaving economists predicting the total level of unemployment could soon soar past 3 million.

The think tank estimates that a person who loses a job paying the average wage can expect to receive just 17% of their income when they claim Universal Credit, even after Sunak introduced a temporary boost to the value of welfare payments as part of the response to crisis. The proportion is as high as 55% in the rest of the OECD, where entitlements are much more closely linked to work histories.

The findings underscore the risks of Sunak allowing benefit payments to revert to their pre-pandemic levels in April, as planned. If the 1,000 pounds ($1,290) a year increase currently in place is reversed, around 4 million families could lose 13% of their income overnight, the IFS warned. That could potentially harm consumer spending and choke off a post-virus recovery.

“As the economic fallout continues, the government now needs to make longer-term decisions about how best to provide sustainable support for those who have lost their livelihoods as a result of the pandemic," said Mark Franks, director of welfare at the Nuffield Foundation, which helped produce the report.

Sunak has also come in for criticism for not addressing the coming welfare crunch last month, when he extended loan programs for struggling businesses and announced a replacement for the furlough program that has supported millions put on leave.

The reason is almost certainly cost. The temporary welfare uplift is already estimated at over 9 billion pounds, adding to a working-age benefits bill which the IFS says could jump by a quarter this year as the pandemic drives up unemployment and reduces household incomes.

The IFS said Sunak should seize the opportunity to change aspects of the welfare system that were “ripe for reform" even before the crisis.

The link between housing support and the current cost of renting a home should be maintained, it said. Until March, support was tied to the value of local rents in 2011. More generous benefits for the self-employed should also be continued, it said.

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This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

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Published: 09 Oct 2020, 06:07 AM IST
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