By Polly Tolley, Citizens Advice Scotland.
The extraordinary circumstances we are living through have disrupted our normal daily routines in ways that would have been unimaginable only a few short weeks ago. Every day the news brings us some extraordinary development, or new data showing how completely unprecedented the scale of this crisis is.
In economic terms, we have seen the UK government essentially underwrite vast swathes of wages in the country, as well as boost social security entitlements. Meanwhile the Scottish Government has increased funding for the Scottish Welfare Fund to deliver more crisis grants, as well as increased funding for Council Tax Reduction.
These measures are all necessary and welcome, because this health crisis is also a huge threat to many people’s finances, especially those on low and insecure incomes or with disproportionately high housing costs.
In the Citizens Advice network in Scotland we are analysing our service data on a daily basis to try and understand what further steps policymakers need to take to protect people financially. And we are worried about what we are seeing.
Last week, employment overtook debt to become the second largest area where CAB advice is being sought (behind only social security). Nearly one in five people in Scotland who sought our advice in March had an employment issue - an increase of 76% against the comparable period last year. And employment queries make up the bulk of advice people are seeking when they come to us with issues relating to Covid-19.
This tells us a few things about the impact the virus is having on people. Many are still not certain of their rights at work following the disruption caused by the pandemic. Some, through no fault of their own, are falling through the gaps in the government support which has been offered so far. And others have been made redundant, had their hours cut, are dealing with a "furlough" income drop of a fifth, or are self-employed and have found their work has dried up.
For many, April will be their first month trying to survive on their new income, which will have knock-on effects which may not be seen until the end of the month.
The spike in employment-related advice suggests that Universal Credit claim rates will continue to rise for some time. That is a cause for concern given almost a million applications were made across the UK in the last fortnight, almost ten times the average rate.
Throughout this month we might start to see the start of a COVID-19 poverty cycle for many, where income from work is either not coming in or is not enough to meet living costs, and the social security system is not able to get money to people quickly enough. At that point, experience tells us, people face impossible decisions on household bills and they often fall into debt, or increase the levels of debt they are already carrying, to balance the books.
But unlike the pandemic, some steps can be taken to stop this detrimental cycle from starting.
Employers must take advantage of the government’s worker retention scheme. The point of keeping workers on the books is to keep them employed while ensuring this doesn’t become overly burdensome on employers, as well as ensuring the strain on the social security system isn’t overwhelming.
The retention scheme sees the state cover 80% of someone’s wage, but there is no obligation on employers to top up the other 20%. We would encourage employers wherever possible to do so, even if it means taking advantage of other government loans and grants available.
The million applications for Universal Credit in the past fortnight across the UK shows the unprecedented demand the social security system is facing. Our views on Universal Credit and its flaws are well documented. However, we would urge those needing to access social security entitlements for the first time to do so without delay. There is no stigma associated with making a claim: the social security system does provide a safety net for people in times such as these, paid for by workers through national insurance contributions over many years.
Alongside taking the necessary steps to preserve life, the UK and Scottish Governments have to undertake a delicate balancing act: to ensure that managing the public health risk doesn’t push an unacceptable number of people into a poverty cycle which becomes difficult to escape from.
Our network will continue to use our data to inform both Governments of where the pinch points are. At this moment in time, from our viewpoint it looks like they have taken the correct steps. What is crucial now is that both people and employers take advantage of the measures in place to protect peoples’ finances.
As ever, the Scottish Citizens Advice network is here for anyone who needs further help or support.
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CAB stats reveal the dangers of a COVID-19 poverty cycle
By Polly Tolley, Director of Impact, Citizens Advice Scotland.
NB This article was published in the Herald newspaper on 8 April 2020.