NEW ANALYSIS SHOWS that by May, over 1 million more people will be living on an income with which they cannot afford to meet everyday needs, even if the £20 Universal Credit uplift is extended.

By May, one in three people (21.7 million) will have too little income to afford the basics for a decent standard of living (the Minimum Income Standard), according to new analysis from the New Economics Foundation (NEF). Within this, 12.9 million people (one in five) will be living at an especially high risk of material deprivation (below 75 per cent of the Minimum Income Standard), if the Universal Credit uplift is removed.

The Minimum Income Standard (MIS) is calculated by the Joseph Rowntree Foundation and Centre for Research in Social Policy to give a threshold for the ​“minimum socially acceptable standard of living” and provides the basis for calculating the real living wage. Unlike poverty thresholds, which is a relative measure of income, this is calculated on the basis of the level of income needed to afford the basics.

The analysis, which updates NEF’s forecast of people living below the MIS, shows that even if the £20 per week uplift to universal credit is extended by six months, there will be an additional 1.1 million people living below the MIS compared to September 2020 and an additional 1.2 million living below 75 per cent of MIS and at high risk of material deprivation. By November 2021, when the universal credit uplift is likely to come to an end, there will be an additional 1.2 million people living below the MIS compared to September 2020 and 1.8 million people living in households below 75 per cent of the MIS.

The analysis shows that despite expected economic recovery overall and falling unemployment levels, removing the £20 uplift after six months will increase the number of people living at high risk of material deprivation. Between May 2021 and November 2021, the number of people living in households below 75 per cent of the MIS will increase by 600,000 if the uplift is only extended for six months.

The analysis uses the latest labour market and economic data, as well as the latest Bank of England forecasts for Q2 (April to June) 2021 and Q4 (October to December) 2021 to forecast the number of people set to fall below the MIS in the spring and autumn of this year. The forecast also shows the number of households living on less than 75 per cent of the MIS, who are four times more likely to experience material deprivation than those above.

Latest labour market data shows that last quarter the unemployment rate was 5.1 per cent, 1.3 per cent higher than last year. And with furlough due to end in April, the Bank of England projects unemployment will rise to 7.8 per cent in April-June 2021. As a result, millions of people are relying on our social security system to support incomes and help put food on the table. The latest data reveals there were 5.9 million on universal credit by December 2020.

NEF argues that as a bare minimum, the £20 uplift must be maintained for those on Universal Credit or receiving Working Tax Credit, and also extended to those on legacy benefits who do not currently have access to it. But, pointing to the severity of the number of those struggling even with the uplift, argues that these measures are not adequate compared to the scale of the income crisis the UK is facing. NEF is therefore calling for a living income, starting with a new minimum income guarantee, that ensures no one would fall below a level needed to live a decent life. The guarantee would ensure that everyone who needs it receives at least £227 a week through the rest of the pandemic – making the UK economy stronger and pushing money back into local communities.

Sarah Arnold, Senior Economist at the New Economics Foundation, said: “There seems to be light at the end of the tunnel in this pandemic but we are by no means out of the woods yet. If the public health crisis abates as we all hope it will, it will lay bare the true extent of the crisis in living standards that is now a reality for millions of families.

“NEF’s new analysis shows the devastating impact the crisis is having on people across the country and even if the economy starts to recover this year, we will still see an increase in the number of households falling into extreme hardship. This isn’t right – we shouldn’t be leaving anyone out of the recovery.

“The £20 uplift and the furlough scheme were a recognition by the government that our current safety net is insufficient to protect livelihoods and incomes. It is time to build one that does, and that is fit for the future. Part of this should be a Living Income to ensure that people have enough to live, not just survive.”

* Read the full analysis here

* Source: New Economics Foundation