Hundreds of thousands of people who lost their jobs and livelihoods as a result of the Covid-19 crisis were refused access to universal credit, leaving many with little or no state support as their household finances crashed, it has emerged.
At least 300,000 applications for universal credit during the first four months of pandemic were deemed ineligible because those trying to claim had over £16,000 in savings or their partners were deemed to earn too much under strict means-tested welfare rules, according to official figures obtained by the Labour party.
Quick GuideUK retail and hospitality job cuts on back of Covid-19 crisis
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Marston's - 2,150 jobs
15 October: Marston's - the brewer which owns nearly 1,400 pubs, restaurants, cocktail bars and hotels across the UK - said it would cut 2,150 jobs due to fresh Covid restrictions. The company has more than 14,000 employees.
Whitbread - 6,000 jobs
22 September: Whitbread, which owns the Premier Inn, Beefeater and Brewers Fayre chains, said it would cut 6,000 jobs at its hotels and restaurants, almost one in five of its workforce
Pizza Express – 1,100 jobs
7 September: The restaurant chain confirms the closure of 73 restaurants as part of a rescue restructure deal.
Costa Coffee – 1,650 jobs
3 September: The company, which was bought by Coca-Cola two years ago, is cutting up to 1,650 jobs in its cafes, more than one in 10 of its workforce. The assistant store manager role will go across all shops.
Pret a Manger – 2,890 jobs
27 August: The majority of the cuts are focused on the sandwich chain's shop workers, but 90 roles will be lost in its support centre teams. The cuts include the 1,000 job losses announced on 6 July.
Marks & Spencer – 7,000 jobs
18 August: Food, clothing and homewares retailer cuts jobs in central support centre, regional management and stores.
M&Co – 400 jobs
5 August: M&Co, the Renfrewshire-based clothing retailer, formerly known as Mackays, will close 47 of 215 stores.
WH Smith – 1,500 jobs
5 August: The chain, which sells products ranging from sandwiches to stationery, will cut jobs mainly in UK railway stations and airports.
Dixons Carphone – 800 jobs
4 August: Electronics retailer Dixons Carphone is cutting 800 managers in its stores as it continues to reduce costs.
DW Sports – 1,700 jobs at risk
3 August: DW Sports fell into administration, closing its retail website immediately and risking the closure of its 150 gyms and shops.
Marks & Spencer – 950 jobs
20 July: The high street stalwart cuts management jobs in stores as well as head office roles related to property and store operations.
Ted Baker – 500 jobs
19 July: About 200 roles to go at the fashion retailer’s London headquarters, the Ugly Brown Building, and the remainder at stores.
Azzurri – 1,200 jobs
17 July: The owner of the Ask Italian and Zizzi pizza chains closes 75 restaurants and makes its Pod lunch business delivery only
Burberry – 500 jobs worldwide
15 July: Total includes 150 posts in UK head offices as luxury brand tries to slash costs by £55m after a slump in sales during the pandemic.
Boots – 4,000 jobs
9 July: Boots is cutting 4,000 jobs – or 7% of its workforce – by closing 48 opticians outlets and reducing staff at its head office in Nottingham as well as some management and customer service roles in stores.
John Lewis – 1,300 jobs
9 July: John Lewis announced that it is planning to permanently close eight of its 50 stores, including full department stores in Birmingham and Watford, with the likely loss of 1,300 jobs.
Celtic Manor – 450 jobs
9 July: Bosses at the Celtic Collection in Newport, which staged golf's Ryder Cup in 2010 and the 2014 Nato Conference, said 450 of its 995 workers will lose their jobs.
Pret a Manger – 1,000 jobs
6 July: Pret a Manger is to permanently close 30 branches and could cut at least 1,000 jobs after suffering “significant operating losses” as a result of the Covid-19 lockdown
Casual Dining Group – 1,900 jobs
2 July: The owner of the Bella Italia, Café Rouge and Las Iguanas restaurant chains collapsed into administration, with the immediate loss of 1,900 jobs. The company said multiple offers were on the table for parts of the business but buyers did not want to acquire all the existing sites and 91 of its 250 outlets would remain permanently closed.
Arcadia – 500 jobs
1 July: Arcadia, Sir Philip Green’s troubled fashion group – which owns Topshop, Miss Selfridge, Dorothy Perkins, Burton, Evans and Wallis – said in July 500 head office jobs out of 2,500 would go in the coming weeks.
SSP Group – 5,000 jobs
1 July: The owner of Upper Crust and Caffè Ritazza is to axe 5,000 jobs, about half of its workforce, with cuts at its head office and across its UK operations after the pandemic stalled domestic and international travel.
Harrods – 700 jobs
1 July: The department store group is cutting one in seven of its 4,800 employees because of the “ongoing impacts” of the pandemic.
Harveys – 240 jobs
30 June: Administrators made 240 redundancies at the furniture chain Harveys, with more than 1,300 jobs at risk if a buyer cannot be found.
TM Lewin – 600 jobs
30 June: Shirtmaker TM Lewin closed all 66 of its outlets permanently, with the loss of about 600 jobs.
Monsoon Accessorize – 545 jobs
11 June: The fashion brands were bought out of administration by their founder, Peter Simon, in June, in a deal in which 35 stores closed permanently and 545 jobs were lost.
Mulberry – 470 jobs
8 June: The luxury fashion and accessories brand is to cut 25% of its global workforce and has started a consultation with the 470 staff at risk.
The Restaurant Group – 3,000 jobs
3 June: The owner of dining chains such as Wagamama and Frankie & Benny’s has closed most branches of Chiquito and all 11 of its Food & Fuel pubs, with another 120 restaurants to close permanently. Total job losses could reach 3,000.
Clarks – 900 jobs
21 May: Clarks plans to cut 900 office jobs worldwide as it grapples with the growth of online shoe shopping as well as the pandemic.
Oasis and Warehouse – 1,800 jobs
30 April: The fashion brands were bought out of administration by the restructuring firm Hilco in April, with all of their stores permanently closed and 1,800 jobs lost.
Cath Kidston – 900 jobs
21 April: More than 900 jobs were cut immediately at the retro retail label Cath Kidston after the company said it was permanently closing all 60 of its UK stores.
Debenhams – 4,000 jobs
9 April: At least 4,000 jobs will be lost at Debenhams in its head office and closed stores after its collapse into administration in April, for the second time in a year.
Laura Ashley – 2,700 jobs
17 March: Laura Ashley collapsed into administration, with 2,700 job losses, and said rescue talks had been thwarted by the pandemic.
Many who were turned down for universal credit – or who qualified for a reduced level of support that covered only a fraction of their monthly outgoings – have struggled to pay their rent, mortgage and other bills after their household income dipped dramatically as a result of redundancy or the collapse of their business.
The ending of the job retention scheme has triggered fears of a living standards crisis for middle-income families who are forced by the Covid-19 economic crisis to turn to the benefit system in large numbers for the first time.
About 26% of new universal credit claimants are from managerial, administrative and professional backgrounds, according to findings by the ESRC-funded Welfare at a Social Distance academic research project, a trend that may bring fresh scrutiny of a welfare system designed primarily for people on low incomes.
Daniel Edmiston, a lecturer in social policy at the University of Leeds, said the benefits system was unable to keep pace with real-life living expenses for many entering it as a result of Covid-19: “First-time claimants are often surprised by the amount they receive, and the UK’s flat-rate system of payments, given the contributions they have previously paid into the system.”
There are currently about 6 million people on universal credit, twice as many as before the pandemic. A surge in benefit applicants is expected this autumn as furlough support winds down and hundreds of thousands of jobs are cut.
The Resolution Foundation thinktank has warned that for many moving onto universal credit from furlough would be “a shock to families’ living standards”. It estimated that people who were furloughed had typically lost 9% of their income, while those on universal credit saw their income dip by 47%.
Labour called on the government to extend and strengthen the safety net: “Going into this crisis it was clear that the social security system was full of holes and would not be adequate to support people and the economy through this crisis,” said shadow work and pensions secretary Jonathan Reynolds.
The Department for Work and Pensions defended the system. A spokesperson said: “Universal Credit is a means-tested benefit and it rightly assumes that people with significantly above average levels of savings and access to the income of a partner will draw down on this support before receiving government help.”
A Guardian investigation, in which more than 200 people submitted accounts of their first-time experience of universal credit after losing their job under Covid-19, revealed shock and surprise at the tight restrictions on eligibility – and the parsimoniousness of what is available to those who manage to qualify for support.
Emma Dempsey, 32, a freelance TV producer who was refused both universal credit and financial help through the self-employed income support scheme, told the Guardian: “I have paid taxes all my working life … I feel the state has completely broken its social contract with me.”
An airline pilot made redundant just before lockdown, said his £14,000 savings effectively wiped out his universal credit claim, leaving him on £300 a month on job seeker’s allowance. “There was no safety net for me at a time when, through no fault of my own, I was in financial crisis,” he said. “I did not realise that the social security system in this country was in such bad shape.”
One respondent, a business analyst new to universal credit , saw her benefits heavily reduced because of savings she had set aside to pay a tax bill, leaving her unable to meet her rent said: “My experience with the universal credit system has … left me aghast at what the most vulnerable in our society have to go through.”
Many were angry that their savings disqualified them from support, or reduced it substantially, forcing them to use up funds set aside for a tax bill, mortgage deposit, or retirement fund. One said: “I am lucky to have savings but feel like I’m being penalised for having spent years being careful with my money and playing by the rules.”
While those refused universal credit can sometimes apply for job seeker’s allowance, this is worth just £74 a week – £20 a week less than the current weekly basic living allowance under universal credit – lasts for just six months and offers no help with housing costs.
Under universal credit guidelines, anyone with capital or savings of over £16,000 is ineligible to claim support. Claimants with savings of over £6,000 face tapered deductions from benefit payments at a rate of £4.35 a month for every £250 over the lower limit.
Sam Williams, a welfare benefits specialist at Citizens Advice Warrington, said it had seen an increase in queries about benefit eligibility since lockdown, including people refused universal credit due to household savings or partner’s earnings: “They’ve done everything they’re supposed to, they’ve worked for a long time, and in their moment of need they’re not being supported.”
Case studies (some names have been changed)
Emma Dempsey, 32, freelance TV producer, London
When work dried up in lockdown I discovered I wasn’t eligible for the self-employed income support scheme (despite being 100% self-employed for 18 months), or for universal credit because I had over £16k in life savings. Some might say this is precisely what savings are for– for emergencies – but I had made sacrifices for many years to build these savings up in the hope of one day affording a mortgage deposit, as well as to provide for things like maternity cover and sick pay. What stings is if I’d been wealthy enough to afford a mortgage, I wouldn’t have had these savings, and would have been eligible for universal credit. Instead, for months I was forced to burn through my life savings to pay full rent to my landlord of £1,080 a month despite having income of just £74 a week jobseeker’s allowance. It’s better than nothing but laughable when you’ve paid a good chunk of tax and get barely anything back. I have paid taxes all my working life, done everything right. It’s like you have a social contract with the state, you do your bit, they do theirs. I feel the state has completely broken its social contract with me.
Antony, 55, senior social care manager, south-east England
I was made redundant in January and my attempts to get another job ground to a halt under lockdown. We had few savings and a big mortgage. I did minimum wage shifts in an Amazon warehouse, and as a test and trace officer, cashed in a small pension, and took a mortgage holiday. But by June I was panicking. I thought if I could get universal credit we would have a fighting change of keeping the house. I was turned down because my wife’s income took us above the household earnings threshold. But we had lost two-thirds of our household income. I felt totally let down. I had assumed that we still live in a society where there was a safety net for people who from no fault of their own need support at time of crisis. After months of stress I’ve luckily now got a job in social care. I think there should be a safety net system whereby the benefit is proportionate to your outgoings, that meets you half way and gives you breathing space to get back into work without fear of losing your home.
Janine, 40, hospitality worker, north-west England
I’ve never needed to claim [benefits] before but because my industry had completely shut down and I was denied furlough I looked into universal credit. I did one of those online benefits calculators and discovered I couldn’t get a penny. This was because I was over the £16,000 savings threshold. This time last year I wouldn’t have been over but my Dad died and that inheritance, coupled with what I had managed to save by myself, took me over the limit. If I had spent that money [before lockdown] I would have been fully entitled to universal credit. But because I was hoping to one day put this towards owning my own house I’m now having to spend it to live until I get a new job. If I had left my job out of choice I wouldn’t feel this was so awful. But because my employers decided to terminate our contracts due to Covid it seems unfair that I’m having to lose what my Dad left me while others are getting helped [through furlough] and are able to keep hold of their savings.