Does more need to be done to improve financial wellbeing in the UK?
2021 had a difficult start for many, with the country in lockdown for the first few months of the year. In a report by Toluna in June, 38% of people said that they were worried about their financial security, with over a third of respondents stating that they were less well off than they were before the pandemic.
Covid-19 has affected many sectors from hospitality to aviation leading to a dramatic change to the employment landscape. As a society, we had to adapt the way we live and work, and whilst some thrived through the last year, the full effect of recent changes in the economic landscape is likely to mean many more people are less financially secure than at this point last year.
In my latest article, I will explore employment, inflation and financial support to see whether more needs to be done to improve financial wellbeing in the UK.
An uncertain employment market
With many industries unable to operate during the various lockdowns, it left uncertainties across the job market. Recent data indicates that 136,000 people had been moved to unemployment or inactivity when the furlough scheme ended in September, far less of an immediate impact than originally predicted. Also, between August and October 2021, there were around 1,172,000 job vacancies, according to the Office for National Statistics (ONS) and unemployment between July and September was estimated at 4.3%, which is 0.3% higher than pre-pandemic levels, but 0.5% lower than the previous quarter.
Throughout 2021, things have seemed to become more stable with the reopening of many sectors due to the easing of restrictions. It remains to be seen whether this trajectory will remain, especially with the increasing likelihood of another full lockdown in the coming months. From here, we must ask what support will be available to people and businesses, who might face uncertainty once again.
Despite there being more vacancies though, and anecdotal evidence of higher wages in some sectors, there is a big gap between where jobs are and where those who need them are - both geographically and in terms of skills and capabilities.
Inflation and the increased cost of living
The biggest impact on daily life that everyone will experience is the increase in inflation. This rose by 3.1% in September and data released by the ONS put the cost of living in October at 4.2%. This drastically surpassed the Bank of England’s 2% target, with the Bank also predicting that CPI inflation rates will reach 5% by April next year. Luckily for the multimillionaires, they have likely gotten wealthier over the course of the pandemic, unlike those who are on fixed, low incomes.
The Bank of England views inflation as helpful to hold a competitive market, but this increase well surpasses most economists’ view of what constitutes a “good inflation” rate. This increased rate categorises the current inflation rates as ‘walking inflation’, which could be harmful to many as the economy’s growth is rising more quickly than any increase in wages. A further effect of Brexit has been supply-chain issues unseen across most other countries, which also affects inflation by reducing the availability of goods and services.
To combat this, Rishi Sunak, Chancellor of the Exchequer, announced that the National Living Wage and the Minimum Wage (for those aged over 23) would increase to £9.50, however, this is not due to start until April next year. Additionally, those aged 21-22 will get a pay rise from £8.36 an hour to £9.18 – before tax. The Living Wage Foundation (LWF) had previously set the national real living wage at £9.50 an hour, for those outside of London. In line with increasing inflation and costs of living, the LWF further increased their calculation of what it costs to live to £9.90 an hour for people outside London and £11.05 for those in London on 15th November 2021. This is the standard that Great Western Credit Union exceeds, and where we believe other employers should set the bar as a minimum.
Furthermore, the Institute for Fiscal Studies said: “The UK’s economy is in the midst of a sharp - but incomplete and widely imbalanced - recovery,” suggesting that the devastating economic impact of the pandemic is far from over.
A cut to universal credit
The most notable monetary effect for the nearly 6 million people in the UK who claim universal credit (UC) is the £20 a week/ £1,040 a year cut. Citizens Advice states that single claimants under 25’s are being hit the worst – losing up to one-quarter of their annual income. The Resolution Foundation’s report on the autumn budget predicted that this UC cut would lead to a further 160,000 people being pushed into out-of-work-poverty, meaning that 73% of families on UC (3.6million) will be worse off.
In the UK, over 29,000 18-34-year-olds are facing youth homelessness, reaching a five-year high according to Centrepoint. Alternately, the Independent reported that food banks have seen a soar in demand following UC cuts, with 45% of food banks preparing to cut food parcels or turn people away because of supply chain problems. This demonstrates that cuts to UC are removing a lifeline for many, plunging millions of people into financial instability.
Creating a more positive future
Although we are still waiting for more data to come through, for example on the energy price cap change expected in Spring 2022, our suspicion must be that the majority are currently or are soon to be worse off than they were at the beginning of 2021. Though employment opportunities have increased, the cost of living, poverty, fuel prices, malnutrition rates and food bank demands have undoubtedly worsened across the past 12 months - and are set to get much worse as the impact of rising energy prices, for example, continues to feed through into people’s expenditure. The government’s inaction could have catastrophic implications across society, especially in the event of another full lockdown in early 2022.
Here at the Great Western Credit Union (GWC), we believe that we can’t just revert back to the old ways of organising our economic activity. We all have a part to play in working together to address the growing wealth divide and our mission is to help our communities to overcome the challenges we face. Organising through co-operations and mutuality is one way to do that, whether through greater employee-ownership or through the credit union’s affordable loans and safe, ethical saving accounts.
In our view, with the picture of the future looking daunting, we should be looking to solve the problems across our region that have existed for some time. As the biggest credit union in the region, we are offering fairer and greener financial services to thousands of people across South-West England to help our businesses, communities and people to thrive.
If you would like to get in contact with us, please send us an email or call us on 0117 924 7309.