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Government’s Covid response leaves poorest to shoulder most economic risk and will widen inequality across UK, think tank says

Almost half of the cost of the government’s newly-extended Covid-19 furlough scheme will be spent on rent and debt repayments, amounting to an implicit bail-out of landlords and banks, according to new IPPR analysis.

Without further action the effect of the Covid-19 lockdown will be to widen inequality across the UK, says the paper published by the think tank today.

It follows the government’s announcement yesterday (TUES) that the “furlough” scheme is being extended by up to four months.

The paper's authors found that families in upper pay brackets who are still able to work are likely to be spending less and saving more, while low-income families on furlough will be gradually racking up further debt.

The paper, by economists Christine Berry, Laurie Macfarlane and Shreya Nanda, calculates that:

  • Up to 45 per cent of the net cost of the furlough scheme will be spent on rent and debt repayments to landlords, banks and other lenders, amounting to £10 billion under a three-month shutdown, and £21 billion if the shutdown and furlough scheme continued for six months
  • Households in the second highest income decile may be saving an extra £189 per week on average, where earners are able to continue working from home
  • Those in the second lowest income decile may be adding an average £12 a week to their existing debts, if earners are furloughed on 80 per cent of salary

The calculations are based on an assessment of the likely changes to household spending during lockdown, including savings in the cost of travel to work for all households. The economists analysed a range of publicly available data, including from the ONS.

Better-off households will make significant savings from curtailed “discretionary” spending on holidays, hotels, restaurants and cultural and leisure activities, but as poorer household spend less on these they have little scope to make such savings.

Bills for food, household utilities and other essentials are largely unchanged, as are – for most families – the costs of rent, mortgages and other repayments. Even those who take advantage of rent or repayment “holidays” will eventually have to pay off their debts, with additional interest.

As a result, say the authors, landlords and lenders are effectively protected from the economic impact of the virus, while poorer households bear the brunt. They warn that if families emerge from the crisis less able to spend because their debts are higher, it will take longer for the economy to recover.

The paper says:

“The long-term effects of rising indebtedness on the one hand, and a likely rebound in asset prices on the other, are likely to further widen inequalities between the working poor and the asset-owning wealthy.

“Without steps to actively redress these inequalities and to ensure the risks of the crisis are fairly shared, the UK’s economic recovery is likely to be slow, uneven and unfair, worsening existing structural imbalances.”

The report also criticises the support system for businesses, including interest rates charged on crisis loans.

It calls for short-term measures to ensure that banks, landlords and the well-off also take their share of the burden, including:

  • Cap interest rates on the state-backed portion of new business loans at 0 per cent or 0.5 per cent, as in Switzerland
  • Consider bans on dividends and share buybacks so that government support for large businesses does not indirectly subsidise shareholders and highly-paid executives
  • End “no fault” evictions urgently as the first step in a wider package of reforms to boost renters’ rights.
  • Explore the possibility of a freeze on rent, debts and bills for some struggling households, without new debts accruing, within current legal frameworks

Failure to take immediate steps would make it even more important to consider radical longer-term policy options, the paper argues.

These could include higher taxes on wealth, land ownership or excess profits; rent controls; and retrospective write-downs of debts built up by individuals during the crisis. The authors also propose taking advantage of the low RBS share price to bring the bank into full public ownership.

Carys Roberts, IPPR’s Executive Director, said:

“It’s the right decision to extend the job retention scheme, which is so vital to lives and livelihoods across the country. But it’s also important to understand who is really being protected most.

“IPPR’s research finds that while millions of ordinary people are seeing a hit to their incomes, the government is under-writing the income of banks and landlords without any obligation to take a similar hit. That amounts to an implicit bailout.

“We mustn’t repeat the mistakes of previous crises, by asking those least able to weather the crisis to make the greatest sacrifices. The economic risks and costs of the shutdown should be shared fairly across society.

“The government must urgently ensure that its programme of support is protecting those who need it. And as we emerge from this crisis, it will be critically important to rebuild a fairer economy, with those whose incomes have been protected contributing more.”


Carys Roberts, IPPR’s Executive Director, is available for interview

The report’s authors – Christine Berry, Laurie Macfarlane and Shreya Nanda – are also available for interview. (More information on the authors in note below).


David Wastell, Head of News and Communications:

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  1. The IPPR-commissioned discussion paper, Who Wins and Who Pays? Rentier power and the Covid crisis, by Christine Berry, Laurie Macfarlane and Shreya Nanda is available for download at:
  2. Christine Berry is a researcher, writer and consultant. She is a Trustee of Rethinking Economics, a Fellow of The Democracy Collaborative, a Senior Fellow of the Finance Innovation Lab and a Contributing Editor of Renewal, the journal of social democracy. Laurie Macfarlane is an economist and writer, and co-author of the book Rethinking the Economics of Land and Housing. Shreya Nanda is an economist at IPPR.
  3. Graphic: Up to 45 per cent of net cost of Job Retention Scheme will go to landlords, banks and other lenders

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  1. Estimates of the proportion of the net cost of the furlough scheme spent on rent and debt repayments are for working households only. Other estimates are for all households.
  1. The paper is published by IPPR’s Centre for Economic Justice. The Centre was set up in 2019 to broaden and deepen the work of IPPR’s Commission on Economic Justice, which completed its final report in September 2018.

    Commissioners included Archbishop of Canterbury Justin Welby and Frances O’Grady, general secretary of the Trades Union Congress. The Commission recommended far-reaching reforms to the UK economy, including establishing a Citizens’ Wealth Fund. Its report, Prosperity and Justice, is at
  2. IPPR is the UK’s pre-eminent progressive think tank. With more than 40 staff in offices in London, Manchester, Newcastle and Edinburgh, IPPR is Britain’s only national think tank with a truly national presence.