Business

Stimulus package for UK’s poorest families vital, report says

An urgent “family stimulus” package alongside the chancellor’s new job support scheme is vital to prevent hundreds of thousands of parents and their children falling below the poverty line this winter, according to a new joint report from the IPPR thinktank and the TUC.

The organisations have called for an overhaul of the UK’s social security offering, which they argue is one of the least generous in the developed world and inadequate to cope with the expected steep rise in joblessness caused by the coronavirus pandemic.

IPPR’s executive director, Carys Roberts, said that without a significant cash injection, more families would be forced to rely on food banks.

“Putting more money into families’ pockets will spare hundreds of thousands of children from the scarring effects of poverty over the next 18 months,” she said. “But this family stimulus will also mean an economic stimulus, helping to keep the economy going as we push through the pandemic, and preventing even more jobs being lost.”

Alongside the support scheme to slow the rate of job losses, the government should put money directly into the pockets of the poorest families either by doubling child benefit or by increasing the child element of universal credit by £20 a week, the organisations say.

The Office for Budget Responsibility (OBR), the Treasury’s independent forecaster, said in July that unemployment could rise beyond the levels seen in the 1980s, forecasting an unemployment rate of 9.1% in 2020.

The IPPR/TUC report, A Family Stimulus, argues that doubling child benefit would put £14bn directly into the economy over the next 18 months, lift 500,000 children and 200,000 adults out of poverty and boost GDP by £19bn, or 0.6% of GDP in 2021-22, if the ripple effects of additional spending are taken into consideration.

Increasing the child element of universal credit by £20 a week per child and removing the two-child limit would take more than 700,000 children and 300,000 adults out of poverty, put £11bn directly into the economy and increase GDP by £15bn, it says.

The report also calls for more support for the embattled childcare sector, which it says has already lost an estimated £228mn, or 13% of its income, through parents withdrawing their children.

Providers are facing a £400m shortfall in funding in January, when government support for free places unused during the pandemic is due to end. The organisations have called for the government to continue funding the pre-pandemic number of free childcare places until their take-up has returned to normal, and to provide an additional £88m in transitional funding similar to that for schools.

The report notes that the German government has pledged an additional £911m for childcare infrastructure, and the Canadian government has invested £365m to protect access to childcare.

“It’s vital to support childcare services, which have been heavily hit by the pandemic,” said the general secretary of the TUC, Frances O’Grady.

“When a childcare provider goes out of business, the knock-on effects are dreadful for working parents, employers and the economy,” she said. “Without childcare, many parents would have to reduce their hours, or may not be able to work at all. And that will hold back our economic recovery.”

The Department for Work and Pensions said that the government funded 15 hours of free childcare for two-year-olds from disadvantaged families and up to 30 hours for all families of three and four year-olds.

An extra £1bn would be available for wraparound care from 2021, while a £1bn Covid package would help the most disadvantaged children. The benefit cap, with exemptions, was designed to provide an incentive for “hard-working taxpaying households”.