Winners and losers from Covid laid bare amid the new normal
THE damage to our bank balances caused by the Covid-19 pandemic and lockdown is much smaller than many people feared.
But some sections of society have been hit more than others, with the self-employed, low-income working families, and people from ethnic minority groups most likely to have been pushed into poverty.
And while the Government has succeeded in helping many households avoid poverty, it’s unclear what will happen once temporary schemes such as the furlough policy come to an end.
Those are the findings of a major inquiry by think tank the Institute for Fiscal Studies, funded by the Joseph Rowntree Foundation.
The think tank publishes a report every year on Living Standards, Poverty and Inequality in the UK.
This year’s report understandably focuses on the effects of the Covid pandemic.
Overall, the finding is that household finances have barely changed, based on a series of measurements.
In early 2021 unemployment, real earnings growth, arrears on household bills, and foodbank use were all at similar overall levels to those before the pandemic.
The Institute for Fiscal Studies says this is a surprise, but puts it down to the success of Government schemes to protect incomes, such as the furlough scheme and the temporary £20-a-week increase in Universal Credit.
Tom Waters, an author of the report and a Senior Research Economist at IFS, said: “Given that the pandemic has seen the biggest ever recorded drop in national income, the overall picture on deprivation and the labour market at the start of this year looks surprisingly positive.
“In the main, this is a result of the success of the furlough scheme which has supported the incomes of millions of employees.
“As the furlough scheme is wound down, and the temporary uplift to Universal Credit expires, the
increased support is withdrawn.
“So the key factor for material living standards this year will be how many people either return to their old jobs or are able to find a new job relatively quickly.”
Parts of society have not been protected in the same way as others.
The report found that selfemployed workers who lost all work in the first lockdown saw a sharp worsening of deprivation in the wake of the pandemic, which has only partially receded since.
The proportion of these workers behind on at least one of their household bills jumped in spring 2020 from 2% to 13%, while the proportion reporting financial difficulties rose from 16% to 24%.
By the start of 2021, the proportion behind on their bills was little changed from the first lockdown, at 15%, though the proportion reporting financial difficulties had fallen back, to 11%.
These financial difficulties were probably connected to the high proportion of self-employed workers, 36%, who were ineligible for the Self-Employment Income Support
Scheme. Rises in deprivation were considerably smaller for furloughed employees than for the selfemployed who lost work.
Among families where at least one person works, but who were in poverty before the pandemic, the share behind on bills rose from 9% to 21% in spring 2020, though has since declined back to 10%.
Even at the start of 2021, 13% of these families expected their financial situation to get worse over the coming months.
People from ethnic minority groups saw significant increases in deprivation.
At the start of this year, the
proportion of people from ethnic minority groups who were behind on their bills was 15%, up from 12% before the pandemic.
Tom Wernham, another author of the report and a Research Economist at IFS, said: “The relatively benign aggregate figures on deprivation hide three overlapping groups who have fared considerably worse: selfemployed workers who lost all their work during the first lockdown, families who were in in-work poverty prior to the pandemic, and people from ethnic minority groups.
“How fast and to what extent these groups recover as the economy reopens will be a key determinant of the pandemic’s legacy."
Despite the many caveats, the overall findings echo sentiment from West Midlands business leaders, who are sounding surprisingly upbeat about the state of the economy.
A survey by Greater Birmingham Chambers of Commerce, sponsored by Birmingham City University, concluded that businesses across the region are on the road to recovery.
Chamber chief executive Henrietta Brealey attributed the report’s
upward trends to the influence of the Government’s vaccine rollout, as well as the gradual easing of restrictions which have allowed businesses to resume trade.
She said: “Positive sentiment is coursing through the veins of many businesses in Greater Birmingham.
“The optimism is reflected in the results of our latest survey with domestic demand soaring to a level not seen since the onset of the pandemic, a steady climb in international sales and an upturn in recruitment levels.
“It was also pleasing to see that both turnover and profitability projections continued to rise this quarter.
“Business investment in training and capital investment also continued to tick upwards, with both returning to positive territory for the first time in over a year.”
Professor Julian Beer, deputy vice-chancellor at Birmingham City University, said: “Figures across the board have staged a dramatic recovery over the past six months and are now back to, or possibly very slightly above, ‘normal’ levels.”
People from ethnic minority groups saw significant increases in deprivation