Research examines government’s benefit options amid coronavirus (COVID-19)

Research examines government’s benefit options amid coronavirus (COVID-19)

The Institute for Fiscal Studies has published research explaining the government’s options concerning the temporary increases it created for universal credit and other sections of the benefits system following coronavirus (COVID-19). The increases cost approximately £9bn and in addition to the impact of higher unemployment and lower earnings, spending on working-age benefits could rise by £26bn in 2020–2021, increasing by a quarter since 2019–2020. The report discusses three of the temporary benefit giveaways—the £1,000 a year increase in universal credit, increased housing benefits for low-income private renters and increased benefits for the self-employed.

The £1,000 a year increase in the basic entitlement of universal credit

Ending this increase in April 2021 would mean around 4 million families lose approximately 13% of their benefits. If this remains permanent, it would add 10% to the cost of universal credit, but would undo at most two-thirds of the benefit cuts made since 2015.

Increased housing benefits for low-income private renters

Making this expansion permanent would cost around £1bn a year, with London renters having the most to gain. Another option would be to set the maximum support level to cover 20% of properties which would cost the same as the pre-coronavirus system in the shorter but be fairer.

More generous benefits for the self-employed

There is a concern that minimum floor income (MIF) ‘chokes off’ businesses that may later become profitable, yet the research shows that even before MIF, self-employed workers on means-tested benefits did not see an increase in earnings. However, it is proposed that MIF can be improved, perhaps by applying it on a 12-month rolling average of earnings.

Despite the increase in spending, the Institute for Fiscal Studies explains that the UK remains to have one of the least generous out-of-work benefits systems for workers on average earnings. Therefore, it proposes the government take this opportunity to improve its system.

Source: Tough choices ahead as spending on working-age benefits set to hit record levels

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