New analysis published today by Standard Life Foundation has found that 1.8 million people excluded from government income support schemes have seen their total household incomes fall by at least a third during the pandemic – five times greater than the rest of the UK population. Only 9% of the rest of the population have lost at least a third of their income, compared with 47% of the excluded.

In January 2021, the average annual gross household income of the excluded who had lost a third or more of their income was £24,000, having fallen by at least £12,000 (or £1,000 per month) from their estimated previous income of around £36,000.

The company’s report titled ‘Who are the excluded?’ is an in-depth analysis of the people excluded from the Coronavirus Job Retention Scheme (CJRS, commonly referred to as ‘furlough’) and the Self-Employment Income Support Scheme (SEISS). It is based on research conducted in January 2021 and analysed by the Personal Finance Research Centre (University of Bristol). It found that up to 3.8 million people had lost income as a result of the pandemic but were excluded from the income replacement schemes (of those, 1.8 million lost a third or more of their household incomes, 2 million lost less than a third).

The financial strain reported by those 3.8 million who are excluded from the schemes is evident across a range of indicators:

  • Three in 10 of the excluded struggle to pay for food and every-day essentials, compared to 1 in 10 of the rest of the population.
  • Almost half (47%) of the excluded had used their savings to help make ends meet when their income dropped.
  • A quarter (23%) of the excluded are in serious financial difficulty (compared to just 9% of the rest of the population), rising to 33% of those who had experienced a significant income drop. A further 20% of the excluded are struggling financially.
  • Three-quarters of the excluded (73%) – around 2.8 million people – said they feel anxious about their financial situation, compared with 45% of the rest of the population.

Researchers also found most of the people who have lost a third or more of their total household income had been in insecure work: 36% were gig workers and 26% were self-employed people, compared to 17% and 9% of the whole population respectively.

Most of the excluded (76%) said they had not claimed Universal Credit (UC) either before or since the pandemic (despite experiencing a drop in income due to the crisis), possibly because they were ineligible or because they were unaware or did not want to.

Mubin Haq, CEO of Standard Life Foundation, said “Almost a year into the pandemic, around four million people have been excluded from the government’s income support measures. For many this has been a shell-shock to their living standards, with nearly half losing at least a third of their income – five times higher than the rest of the population. This is placing significant financial strain and distress on families, with many unable to pay for food and essentials.’

“It’s not too late for the Chancellor to put this right and to remove some of the inherent unfairness in the current support schemes. Changes to eligibility to the self-employment income support scheme can be easily made and a targeted grants package could be introduced for those still excluded. No one was meant to be left behind but millions have been. Now the Chancellor is aware of this problem there is no excuse not to put it right.”

Sharon Collard, the report’s lead author, said “Many of the excluded who are falling through these new gaps in support are the same people who were falling through the gaps in our social safety nets before the onset of the pandemic: people at the margins of the labour market whose engagement with work is complex and often under-supported. We know that secure, good quality and well-paid jobs are essential to a sustainable and fair economy, and these will need to be at the heart of the UK recovery, along with better social security and additional state support.”

The authors of the report support the following policy proposals for how the Chancellor could address the issues in the upcoming Budget including:

1)         Extending the eligibility criteria of both CJRS and SEISS by:

  1. a) (SEISS) Accepting 2019/20 tax return data. The ongoing level of SEISS support should be equivalent to the support offered to employees.
  2. b) (SEISS) At a minimum, a reduction in the self-employment income rule from 50% to 25% (as suggested by the IFS), to extend support to more low- to moderate-income self-employed people.
  3. c) (SEISS) At a minimum, offering tapered support to the self-employed with trading profits of between £50,000 and £100,000, to reduce the existing inequality in the scheme (as suggested by the IFS).
  4. d) (CJRS) Extending the furlough cut-off date and continuing to fund 80% of an employee’s salary up to £2,500 per month. Any reduction in furlough support should be gradual and proportional to the reopening of the economy (as was the case in summer 2020). Consideration should also be given to specific sector-based support, targeted on those most severely hit as lockdown is lifted.

2)         Either a targeted grants package (such as the Targeted Income Grant Scheme proposed by the APPG on Gaps in Support) offering support to PAYE freelancers and limited company directors, as well as the newly self-employed (if they fall outside of SEISS eligibility) and those falling outside of the self-employment income rule; or separate grant schemes (such as the NI Limited Company Director’s Support Scheme and NI Newly Self-Employed Support Scheme). This would provide short-term support for groups unlikely to be covered by the existing flagship schemes – even where the eligibility criteria of those schemes is extended.