Lowest paid in UK have suffered the most financially in the pandemic, report finds

People who were trapped in poverty before the pandemic have suffered the most financial damage during the crisis, according to a report warning the government that more support is needed to help hard-pressed families.

The Joseph Rowntree Foundation (JRF) said those who had been struggling to make ends meet before March last year were more likely to work in precarious jobs or sectors of the economy that had been hardest hit by lockdowns.

Calling on the government to make permanent a £20 per week rise in universal credit benefit payments – which is due to be cut from the end of March – it said that many families had been pushed to the brink during the latest lockdown and had few resources left.

In its annual poverty report, the charity said struggling families would find it harder to recover from the double-dip recession triggered by the renewed restrictions and rapid growth in Covid-19 infections.

According to the research, workers on the lowest incomes experienced on average the largest cut in hours at the start of the pandemic almost a year ago, with 81% of people working in retail and accommodation recording a drop in income. More than a third of single parents working in hospitality and over a quarter of those in retail were already living in poverty before their sectors were severely hit by restrictions.

In a reflection of the uneven economic impact caused by the pandemic, the foundation said that four in 10 workers on the minimum wage faced a high risk of losing their job, compared with just 1% of workers earning more than £41,500 a year.

The warning came as unemployment in the UK is expected to rise dramatically this year after the furlough scheme comes to an end in April, and as the pandemic pushes the British economy into a double-dip recession before the vaccine can be administered widely enough to ease restrictions.

Even before the pandemic struck, causing the deepest UK recession for more than 300 years, the foundation said that millions in the UK had lived through a “decade of deprivation” with little progress made on reducing poverty, rising hardship among working households, and a steady increase in child poverty.

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The charity said this rise was mainly because of the Conservative government’s austerity-era benefits freeze between 2016 and 2020, which meant that benefits had not kept up with the rising cost of living. Even after taking into account the boost for universal credit – launched as a temporary measure in March last year when Covid first hit – research from the Institute for Fiscal Studies showed that out-of-work households got £1,600 per year less in benefits than they would have done before the Tory austerity drive began a decade ago.

Warning Boris Johnson’s government that it risked being defined by a record of rising poverty if action was not taken, Joseph Rowntree said tackling the issue must be a central economic priority in 2021.

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It said the chancellor, Rishi Sunak, “must do the right thing” and confirm that the £20 per week uplift in universal credit would be made permanent, saying there was strong public support for this policy choice. Sunak refused to make such a commitment when answering questions from MPs in the House of Commons earlier this week.

Helen Barnard, the foundation’s director, said: “It is a damning indictment of our society that those with the least have suffered the most before the pandemic and are now being hit hardest once again by the pandemic. The government must now make the right decisions to avoid another damaging decade.”

The Treasury said it had taken steps to support those most in need during the pandemic, including raising the living wage, spending more than £100bn on safeguarding jobs, and boosting welfare benefits. “We are committed to supporting the lowest-paid families through the pandemic and beyond to ensure that nobody is left behind.”