Winners and losers in today's summer statement
by Mubin Haq, CEO of the Standard Life Foundation
8 JULY 2020
Young people; economic winners for a change
It’s rare younger people do so well out of a budget, however this is what happened today. At the start of the pandemic there was a concern the economic consequences could cause a whole generation of young people to be left behind. The government’s kickstart scheme announced today to get unemployed young people into work is hugely welcome and if executed well could stave off high unemployment amongst this a generation. We know the dire consequences from previous decades, especially the 1980’s when unemployment hit three million. The scheme will provide much-needed work experience and reduce the scarring effects on young people’s future prospects.
The Chancellor will be aware of the need to ensure the placements created are for decent jobs with good future prospects. He’s been smart in creating demand in the green energy sector through the Green Homes Grants programme, which should ensure that a number of these jobs continue beyond the six-months of support provided by the government.
Double losses for the losers
For those who have been put on furlough, some clarity has been provided as it was made clear today that the furlough scheme is coming to an end. The Chancellor has instead replaced it with a job retention bonus which might encourage employers to keep people on. However, it’s fairly small. At £1,000, it won’t pay many weeks’ wages even those earning minimum wage. There’s a real worry that today’s measures from the Chancellor won’t stem the rising tide of redundancies sweeping across the country.
For those who will move off furlough onto Universal Credit, they are in for a larger economic shock than the one they experienced at the start of the pandemic. Resolution Foundation research funded by Standard Life Foundation shows that that whilst the median fall in disposable income if furloughed is just 9 per cent, that figure is 47 per cent if people lose their jobs and need to rely on Universal Credit.
Whilst many employees have been relatively protected by the government with their employers being incentivised to welcome them back, others have missed out on financial support altogether with little hope of any support.
Our Coronavirus Financial Impact Tracker finds that nearly three million households have not been protected by any of the government’s income protection schemes. Today’s statement will have been a huge disappointment for those unprotected families. The Chancellor made no comment on those households who are currently excluded from government support, a large number of whom are self-employed. Our research shows many households have reduced incomes, mounting bills and little in savings to fall back on. The Chancellor needs to act to prevent those people falling into serious financial difficulties.
At the start of this week we highlighted that nearly 10 million families were likely to be in financial difficulties by the end of July, an increase of two million from April. That’s nearly a third of families in the UK. Whilst the Chancellor’s announcement total a significant £30bn, this is very unlikely to be enough to reverse the number facing financial hardship.