Ministers have been urged to do more to support struggling households when the holiday program ends next month, economists warning that 1.9 million workers are in a “critical” position.
The call for more help comes after Rishi Sunak confirmed this week that the government’s central pillar of financial support, which has helped fund the salaries of 11 million people since the start of the pandemic, will end as scheduled on September 30.
A £ 20-per-week increase in universal credit is also to be phased out, slashing incomes for some of the poorest households as the ceiling on household energy bills rises in October, pushing up the bills for millions of people.
Debt charities have also warned that more than half a million tenants will be in arrears and no longer be protected from the threat of eviction as they were during the pandemic.
The problems are not limited to individuals; companies are also struggling with billions of pounds in debt. Retailers have racked up £ 2.9 billion in rent debt, much of which accrued during times when the law required them to shut down.
These risks are holding them back, preventing investment in stores and jobs, and potentially hastening the demise of the main street, experts warn.
Despite the gloom, the most apocalyptic economic forecasts did not materialize. Last year, the most pessimistic experts estimated that more than 4 million people would be out of work, ushering in an era of mass unemployment unprecedented since the depths of the recession in the early 1980s.
The extended holidays and the rebound in economic activity mean that the peak should now be much lower. However, problems have still accumulated and, according to economists, their magnitude is difficult to determine.
The National Institute for Economic and Social Research (NIESR) predicts that the official unemployment rate will rise by about half a percentage point after the holidays end, which means another 160,000 people out of work.
The problems are expected to be concentrated in particular industries and to affect young workers and those nearing retirement.
The pandemic has exacerbated an existing mismatch between the skills employers need and those available to UK workers.
In health and social care, which depends heavily on migrant workers, there is a huge understaffing, while in accommodation and food services, for example, there are six times as many people on leave as vacancies.
“There is a need to reallocate the workforce from sectors that have a lot of people on leave to those who are hiring,” says Cyrille Leon, of NIESR.
For this reason, it is necessary to end the leave scheme now to allow the economy to grow, although it can be painful for those directly affected, he said.
“The problem with the leave scheme is that it slows down this readjustment by creating additional friction in the labor market. People on leave are not necessarily actively looking for a new job, which means the pool of potential candidates is smaller than it normally is.
“Ending the leave is difficult because people are going to be unemployed, but in my opinion, extending it would make the subsequent adjustment even more painful. “
The withdrawal of support is of particular concern for older workers, said Charlie McCurdy, economist at the Resolution Foundation. Many older workers are still dependent on time off – those who are less likely to leave the plan and return to work than younger workers.
“With layoffs likely to increase at the end of the leave scheme, policymakers should come up with return-to-work schemes targeting workers of all ages – especially as newly laid-off older workers often take longer to work. find a new job after being on leave for extended periods than their younger counterparts and may need tailored counseling and support.
The Foundation is also calling on the government to provide much-needed support to low-income families, including reversing the withdrawal of the £ 20 increase in universal credit – a move 60 Conservative backbenchers also support.
“[Low-income households] will face not only higher unemployment risks following the end of the leave scheme, but also the expected reversal of the vital £ 20 per week universal credit increase and rising fuel costs McCurdy said.
Ofgem announced on Friday that the energy price cap would increase by £ 139 per year for the average household from October 1.
Citizens Advice has warned that withdrawing financial support and rising energy bills could create a “perfect storm” for low-income families while the Fuel Poverty Coalition predicts that an additional 488,000 people could not afford to heat their house because of the price. to augment.
Debt charities report that despite rising household debts for some groups during the pandemic, far fewer people have asked for help, raising concerns that problems are piling up and being masked by the emergency measures put in place during the pandemic.
The magnitude of the problem …
