UK Poverty Post

Close to Home: the recession in the UK

It’s only about a year and half since the Northern Rock bail out brought to widespread public attention that all was not well in the British economy. Since then, events have unfolded at such speed that it’s been hard to pause to take stock. We’ve been told this was no crisis, just one failed business model; then told it was a financial crisis rather than an economic one; then that the damage to the ‘real economy’ would be short and sharp, with the UK better placed than most to weather the storm; and now the Chancellor admits it’s already looking far worse than he predicted six months ago. Government policy responses have followed a similar trajectory – from stand-offish to cheerleading for governments across the world to do ever-more to tackle the recession.

In all, the government has pledged many hundreds of billions of pounds to bail out financial institutions. Without making any judgement on whether this was necessary or well-handled, we can certainly see that it’s not been enough to protect the millions of poor and vulnerable people in the UK from the effects of the recession – and we know that most people agree. Oxfam works with people across the country who have been struggling, and for whom the recession has been making things more difficult. We’ve used what this has taught us about what makes people more vulnerable to the recession to create FRED – a character that symbolises that.

Because it has been clear for a while that government responses to the recession haven’t been enough to protect vulnerable people in the UK – even though the measures announced in the pre-Budget report were a step in the right direction – we’ve been working to set out what a people’s bailout would look like. The report we’re launching today sends a clear message to government that trying to kick-start the financial system to return to the status quo ante is not good enough. We need urgent action right now to prevent job losses today becoming long-term unemployment and scarring of communities tomorrow; but we also need decision-makers to present and build towards a long term vision of a fairer and more sustainable society.

With this in mind, we’ve set out recommendations that will both provide immediate relief for people struggling with the effects of the recession and allow the government to seize the opportunity to rebuild society on firmer, fairer foundations. First and foremost, we’re calling for money to be put in the pocket of people who are struggling right now. But an emergency increase in out-of-work benefits and tax credits and an increase in the threshold at which income tax is paid should be the first step in long-term reform – leading to benefits that keep people out of poverty, and to a more progressive tax system.

Similarly, welfare reform that focuses on increasing conditionality on people just as jobs dry up should be put on hold. Instead, we need a renewal of the welfare system so that it becomes both a safety net and a springboard to sustainable work. Meanwhile, where government should not retrench is from effectively enforcing existing employment rights, or from plans to increase flexible working and extend maternity and paternity leave. Just as the recession increases people’s vulnerability to bad and exploitative employers, so the combination of indebtedness and the credit crunch leaves people living in poverty at the mercy of doorstep lenders and payday loans. So the government should step in and enforce a maximum level of interest for credit, and provide a real alternative to commercial credit through reform and expansion of the Social Fund.

While the government is right both to support struggling homeowners – and should extend much-needed support to private tenants – and to bring forward investment in infrastructure and job creation, these should not be at the expense of long-term change. So investment in energy efficiency should be expanded and used to create new jobs; the social infrastructure of childcare and social care should be seen as at least as important as the physical infrastructure of railways and fibre-optic cables; and the housing crisis should be tackled through a substantial social house-building programme that both kick-starts the construction industry, and tackles the UK’s chronic shortage of decent housing.

This recession is going to exacerbate existing poverty, and will cause more people to fall into poverty. Real suffering is already being caused to people, and there is every likelihood that things will get worse. It is vital that the government deals with the short-term challenges that this crisis presents; but it also has an opportunity to lay the foundations for a better society. With the Budget in two weeks’ time, this is a key moment. We’re calling on the government to renew its commitment to ending poverty in the UK. Vast sums have been found for bank bailouts – and now the government must bail people out too.