As a football fan I have always had time for Marcus Rashford, the Manchester United and England striker. Ever since he made his playing debut five years ago the quality of his play marked him out as a special talent. Over the past year, however, his efforts to raise awareness of the issue of child poverty have elevated his profile beyond the realms of the footballing world. He belies the stereotype of overpaid young footballers and is a credit to his generation.
The school meals debate
In recent days Rashford has lent his support to the campaign against the meagre food parcels provided to low income families whose children would otherwise be receiving free school meals were the schools not closed due to Covid restrictions. The parcels supposedly contained five days’ worth of food valued at £30 but after a social media campaign which highlighted that the value of the parcels fell far short of this, the company providing them was forced to apologise and admit they had failed to meet expected standards. This incident raises a number of issues regarding deficiencies in the UK social welfare system which really ought to be high on the government’s to-do list, with some obvious short-term fixes required but a longer-term overhaul is also necessary.
In this particular case, it is notable that the government fell into line only after Rashford offered his high profile support. Having attempted to ignore Rashford’s intervention on this issue last summer, the government realised very quickly that public opinion would side with the footballer and this was not an issue in which it would prevail. It also shines a light once again on the links between the political system and companies which win government outsourcing contracts. Paul Walsh, the former chairman of Compass Group, which provided the food parcels, and who stepped down last month, donated to the Conservative Party in 2010 and publicly backed David Cameron for prime minister in 2015. Since 2016, Compass Group is reported to have won contracts worth almost £350m for school catering. The almost incestuous relationship between business and politics is not going unnoticed abroad, with the New York Times reporting last month on “Waste, Negligence and Cronyism: Inside Britain’s Pandemic Spending.”
The bigger picture
But arguably a bigger problem is the threadbare state of the UK social safety net, even before its shortcomings were exposed by Covid. It is the weaknesses in the system and the consequences they have for people lower down the income scale that have prompted the likes of Rashford to get involved. The state of the welfare system is an issue that I have written about quite a lot over the years but when even the Financial Times points out the deficiencies in the system the government really ought to take note. Concerns over the alleged generosity of the UK welfare system have been a staple of the popular press for years. Indeed, one of the issues during the Brexit campaign was concern that the UK’s generous welfare benefits attracted a lot of economic migrants who threatened to overwhelm the system. I pointed out five years ago that claims made for the generosity of the UK system were untrue. UK in-work benefits are less generous than the EU average for families with children (around 3-4% lower). Moreover, only those entitled to make a claim can actually receive them and recipients must demonstrate a sufficient degree of attachment to the host country.
For those without children, unemployment benefits are parsimonious in the extreme. According to OECD data, a single person without children in the UK whose previous earnings were two-thirds of the average wage earns 17% of their in-work wage after one month of unemployment compared with an OECD average of 67%. Although this figure tapers away in many countries in a bid to discourage ongoing benefit claims, even after one year the OECD average benefit payment is 43% of previous wages (chart). Not only is the system particularly stingy but claimants for Universal Credit (UC) have to wait five weeks after their first claim before receiving any money, which is quite a problem for those living a hand-to-mouth existence. Just after the last election I did suggest that eliminating this lag would mitigate the worst of the problems and would go some way towards rewarding low income voters who had voted the Conservatives into office. We are still awaiting a permanent fix although the government has temporarily raised the UC payout by £20 per week. Whether it will be extended beyond March remains to be seen.
One of the reasons for the parsimony of the benefits system is that government policy is designed to persuade people that they are better off working rather than claiming benefits. This is not a bad policy in itself. However, there are a rising number of people who are struggling to keep their head above water even though they are in work. According to the Joseph Rowntree Foundation’s latest annual report on poverty in the UK, the proportion of workers who live in poverty has risen in recent years and stood at almost 13% in 2018/19.
As the economist Paul Johnson has pointed out, until fairly recently poverty was an out-of-work phenomenon. The traditional route out of poverty for most people was employment. However this part of the social contract has broken down as far too many people are in jobs that do not pay them enough to allow them to change their circumstances. The reasons for this are complex but they include factors such as the widespread adoption of so-called zero-hours contracts, particularly in low-paid sectors, in which the employer does not guarantee a minimum number of working hours. As a result, many people find themselves income constrained and suffering the uncertainty of not knowing from one day to the next what their income will be. The lockdowns introduced in a bid to curb Covid have made matters worse, since they have impacted most heavily on those low paid workers in sectors such as leisure and hospitality.
What to do?
As for where we go from here, it is too easy simply to say throw more money at the problem. But the JRF recommends that “at a minimum, we need the temporary £20 per week increase to Universal Credit and Working Tax Credit to be made permanent … We also need to shift public thinking so that a poverty-reducing social security system is seen as an essential public service and receives sustainable investment.” Another big problem for those at the low end of the income scale is the cost of housing. A huge rise in house prices over recent years has priced many low earners out of the market and forced them into the expensive private rental sector. The JRF calls for more investment in social housing “as part of a stimulus package, and to reverse the long-term trend of falling availability of social housing.”
The JRF’s demands argue for a greater role for government which would be a reversal of the broad direction of travel of the last 40 years. Perhaps the Covid crisis will indeed be the trigger for a rethink of the primacy of market over state. But recent indications that the government is more concerned to roll back much of the legislation enshrined in the EU “working time directive” rather than reform the welfare system does not fill me with a lot of hope. As Mark Carney noted in his Reith Lecture series last month, the drift “from a market economy to a market society” suggests that issues of distribution and fairness are often overlooked. What the Covid crisis has demonstrated is that we are not all in this together with low earners taking a bigger proportional hit. Economic fairness may well become one of the big social issues of the 2020s and the government would be wise to think about fixing some of the holes in the welfare safety net before it is too late.
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