Why now is the time to invest in solving poverty

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ViewsDecember 4th, 2020

Steffan Evans sets out why the Welsh Government should use some of the £829m that remains unspent from its allocation this financial year to support families in poverty

The publication of new research by the Wales Fiscal Analysis team at Cardiff University earlier this week has drawn considerable attention. Much of the focus has been on their finding that the funding available for the Welsh Government’s fiscal response to Covid-19 is set to fall significantly next year. This has raised some serious concerns about the Welsh Government’s ability to continue to fund measures to control the spread of Covid 19 and to react to what is set to be a challenging economic landscape in the next financial year.

A second finding by the team is just as important, however. The team found that the Welsh Government has around £829m unallocated in its budget which must be spent before the end of this financial year i.e. by March 2021. With tens of thousands of Welsh families struggling to feed their children or to heat their homes this winter, the case for urgently spending some of this money on supporting people in poverty is overwhelming.

What has the Welsh Government done?

The Welsh Government has already taken some welcome steps to support people on low incomes. The provision of support in lieu of Free School Meals during lockdown and the school holidays has provided a lifeline to thousands of families. The investment of extra funds and the relaxation of eligibility rule for the Discretionary Assistance Fund has been another welcome step, as has been the introduction of a £500 payment for low paid workers who must self-isolate. But with so much money left to spend the Welsh Government must act with more ambition and urgency.

What should the Welsh Government do?

The Bevan Foundation recently published report Transforming Wales: how Welsh public services and benefits can reduce poverty and inequality. We believe that if the Welsh Government showed the ambition to adopt our recommendations it could significantly reduce poverty and inequality in Wales.  Many of our ideas would entail multiyear investment. There are things that could be done in the here and now, however, that would allow the Welsh Government to spend some of its £829m and that would have a positive impact on people who are trapped in poverty both in the short and longer term.

Our suggestions are based on three principles:

  • They are actions that can be taken quickly
  • They are actions that can be funded this financial year
  • They are actions that will have a lasting effect on poverty.

Extend the self-isolation payment to cover parents

The Welsh Government’s £500 self-isolation payment provides support to low income workers who have come into contact with the virus. A person is only eligible for support if they have tested positive for the virus themselves or have been contacted by track and trace. This means that parents of children who have been sent home from school and told to isolate but who have not been contacted by track and trace themselves are not eligible for support.

The current approach risks parents falling into significant financial hardship as a result of having to miss work due to childcare commitments and risks virus spread as a result of parents deciding to go to work or as a result of other family members and friends entering the household to look after the child. Extending the scheme to parents would cost the Welsh Government approximately £37m between now and the end of March 2021.[1] With Scottish Government having committed to extend the payment to parents affected by these circumstances and £829m to be spent, there is no reason why this extension should not be applied in Wales.

Provide support nationally

In November the Welsh Government published its Child poverty: income maximisation action plan 2020 to 2021. There is much to be welcomed in the plan, but with such significant funds needing to be spent the Welsh Government must be more ambitious.

For example, under the plan the Welsh Government is proposing to run six pilot projects to raise awareness of benefit entitlements and give people support to maximise their income amongst specific priority groups. With so many people struggling now, and with the Welsh Government having sums to spend now, there is an overwhelming case to run such activities nationwide with the targeted support being available everywhere not just in the six pilot areas.

Free laptops for all children in receipt of Free School Meals

The Welsh Government’s decision to invest £3m in providing data-enabled laptops for digitally-excluded children early on in the pandemic was a welcomed step, enabling recipients to continue their education. The scheme does not only provide assistance in the short term however but also provides children with an ability to better engage with education in the long term, allowing them to develop their digital skills and to do their homework. The scheme has an additional benefit of providing parents with a way to better engage with digital first services such as Universal Credit.

Purchasing data enabled laptops for all children eligible for Free School Meals would therefore offer extensive benefits. With 90,000 children taking up their Free School Meals entitlement in May this year, purchasing low to mid price laptops at around £300 a laptop would cost the Welsh Government approximately £27m, not a significant sum in the context of the funds it has to spend.

Write off tenant saver loans debts

Under the Tenant Save Loan Scheme the Welsh Government provides loans to tenants who have fallen behind on their rent as a result of Covid-19. The loan is paid directly to the landlord with the tenant required to pay it back over time to the Welsh Government along with interest. Whilst action to try and prevent a wave of evictions is welcomed, the issue with the policy is that it saddles tenants with debt, making it harder for tenants to move out of poverty even after the worst of the pandemic has passed. Using some of the unallocated funds to write off the tenant’s debts will provide tenants with a fresh start and could also reduce pressures down the line on public services as tenants struggle to repay their loan to the Welsh Government alongside their rent.

The Welsh Government provided £8m for loans under the scheme so moving £8m from the current unallocated funds to cover this would remove the requirement for tenants to repay their loan.

EMA hardship fund

With a difficult economic environment it is vital that young people are supported to stay in education for as long as possible. Previous research undertaken by the Bevan Foundation has highlighted that young people in Further Education are often at a disadvantage with no guarantee of free home to school transport and the Education Maintenance Allowance (EMA) being cut by a third in real terms.

These challenges have been exacerbated by the pandemic. With classes disrupted, public transport capacity reduced and many of the sectors usually relied upon by young people for work to supplement their incomes shut down, young people have been hit especially hard by the pandemic. The Welsh Government should therefore immediately establish an EMA hardship fund that would allow young people to get support to purchase a laptop to continue their education from home, provide them with support to find alternative ways of getting to their educational establishment or to provide financial support to those struggling with living costs. A hardship pot of £5m would be enough to provide all EMA recipients with nearly £250 in support.

The money is there to help

The estimated costs of all these policies combined come to just under £80m. That is less than 10% of the unallocated resource the Welsh Government has at its disposal. Investing in these policies could therefore provide a vital lifeline to people trapped in poverty in Wales this winter whilst also providing the Welsh Government with plenty of funds to invest in the health service and to provide additional support for the economy.

Steffan Evans is a Policy and Research Officer at the Bevan Foundation 

[1] This estimate is reached by looking at the most recent data published on school absenteeism by the Welsh Government. On the week beginning the 23rd of November 17% of Welsh school children were absent from school. Based on the estimate that 5% to 8% of these children are absent from school for non Covid reasons, this would mean that approximately 32,974 children were absent for Covid 19 related reasons either as a result of being told to isolate by their school or as a result of a parent/ guardian choosing to keep the child home. With 28% of Welsh school children living in households that are eligible for Universal Credit or Working Tax Credit, if all of these children were isolating and assuming that the pandemic is impacting on children in the same way then approximately 9,232 children living in low income households were isolating on the week of the 23rd of November. Assuming each of these children lived in separate households and none of their parents could work from home then extending the payment to the household of children who are having to isolate would have cost the Welsh Government approximately £2.3m for the week. Assuming this demand remains consistent between now and the end of March 2021, extending the payment would cost the Welsh Government approximately £37m over the next 16 weeks.

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