Tag Archives: Income

MyFundingCentral: helping thousands of charities address financial pressures

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The effects of the current cost of living and inflation rises are spiralling through society, and the voluntary and charitable sector is on the frontline when it comes to supporting struggling individuals and communities. However, the organisations delivering this support are anticipating significant financial pressures themselves this winter.

Rising demand and rising costs are combining with falling charitable income to create a crisis within the sector. At the start of September, 46 sector organisations issued a joint statement calling on the Government to provide targeted financial support for charities, voluntary and community organisations and to include these organisations in any plans to support businesses.

Funders are already starting to respond to the pressures – and an anticipated increase in demand for food, debt advice and mental health support – by closing or pausing regular funding schemes in order to launch new emergency funding opportunities, just as they did during the pandemic. It is expected that funders will also provide more support for core costs, in order to help organisations struggling with energy costs or retaining staff.

The importance of grants for the sector

Even in normal times, the voluntary and charitable sector relies heavily on grants from trusts, foundations and government in order to carry out its crucial work.

Recent research from the Law Family Commission on Civil Society has shown, though, that small and medium charities face particularly high costs in accessing funding. On average, they devote more than a third of their total annual grant income to applying for charitable grants. The report suggested that a key cause of this is making applications for funding for which they are actually ineligible.

Smaller charities are unlikely to have dedicated funding officers to search for funding and submit applications. With thousands of funders awarding grants to charities for a wide range of causes and beneficiaries, it can be hugely difficult to keep track of potential funding opportunities and decide which are most relevant.

An affordable, essential solution

It’s for this reason that more and more small charities are turning to MyFundingCentral to help them. Now in its second year of operation, the MyFundingCentral database (produced by software specialists Idox) provides easy access to thousands of grants and social investment opportunities from local, national and international funding sources – all in one place.

The service is available to organisations with an annual income below £1m and is free for organisations whose income is under £30k. Larger charity and voluntary organisations can access Idox’s GrantFinder service, which works with organisations with an income over £1 million.

MyFundingCentral is designed for easy use and around 3000 small charities use the service every month to find funding to keep existing projects going or to expand their work. It is updated every day with new funding opportunities from charitable trusts, foundations, councils, national government and corporate sponsors.

Success stories

Charities regularly share their success stories with us.

Paula Baker who is Director of HeadsUp Mental Health Awareness CIC was pleased to report that they secured £14,500 from four grants identified through MyFundingCentral. “It’s an easy-to-use service, which has benefitted us greatly.” HeadsUp is a charity that works with children and young people, promoting understanding, raising awareness, and breaking down the stigma that surrounds mental health issues. Even small amounts of grant funding can have a big impact on the number of children and young people that they are able to help.

Lucy Whitehouse, Founder and CEO of Fumble.org.uk said that “MyFundingCentral’s portal is totally invaluable to us as a tiny, fledgling charity with really limited staff capacity. The service has helped us find and apply for relevant funding opportunities that we otherwise wouldn’t know about or be able to access.”

Easy to use

Subscribers to MyFundingCentral have immediate access to a database tailored to meet the needs of the charities and voluntary sector. Users of the service can:

  • search the database to identify opportunities that match their project;
  • find niche funding opportunities that free funding tools typically miss;
  • narrow searches to funding available in specific geographic areas;
  • receive alerts about new funding opportunities tailored to their needs direct to their inbox; and
  • get the latest news on funding.

The database is easy to use, with key eligibility criteria highlighted, and information on how to apply fully explained. There’s no jargon, and because all of the funding opportunities have been handpicked by MyFundingCentral researchers to be right for the sector, users can be sure that they are current and relevant to their needs.

For further information and to subscribe, visit the MyFundingCentral website.

Further reading: more about the charities and voluntary sector on The Knowledge Exchange Blog

MyFundingCentral: a funding lifeline for the UK’s vital charities sector

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It should go without saying that the charities and voluntary sector makes a valuable contribution to society. In economic terms, NCVO has estimated that the sector accounts for over 950,000 jobs and over £20bn in GDP. The social value of the sector is harder to measure, but there’s no doubt that the thousands of charities and millions of volunteers across the UK deliver vital support in areas such as homelessness, healthcare and education.

The impacts of the pandemic

During the past two years, the impacts of the COVID-19 pandemic on the charities and voluntary sector have been profound. The Charities Commission has reported that over 90% of charities have experienced some negative impact from Covid-19, while 60% lost income. At the same time, the voluntary sector has experienced a surge in demand for its services.

The importance of grants

While charities rely heavily on donations from the public for their funding, contracts and grants from trusts, foundations and government generate almost as much of the sector’s income. There are thousands of funders awarding grants to charities for a wide range of causes, from poverty relief and housing to educational and community arts projects. Keeping track of all these funding opportunities is challenging, particularly for smaller charities.

An affordable, essential solution

One solution to ensure that charities are up-to-date with information on grant funding opportunities is MyFundingCentral from software specialists the Idox Group.

Now in its second year of operation, the MyFundingCentral database provides easy access to thousands of grants and social investment opportunities from local, national and international funding sources – all in one place.

The service is available to organisations with an annual income below £1m and is free for organisations whose income is under £30k. Larger charity and voluntary organisations can still access Idox Group’s GrantFinder service which works with organisations with an income over £1 million.

MyFundingCentral is designed for easy use, recognising that smaller charities generally do not have specialist staff focused on finding and applying for funding. Around 3000 small charities use the service every month to find funding to keep existing projects going or to expand their work.

A dedicated team of expert researchers monitor, verify and report daily on thousands of funding sources, including charitable trusts, foundations, councils, national government and corporate sponsors. And because the service comes from the same reliable source as GrantFinder – the leading funding database in the UK and Europe – MyFundingCentral has ready-made relationships with funding administrators and fund managers across a wide range of organisations.

All part of the service

Subscribers to MyFundingCentral have immediate access to a suite of services tailored to meet the needs of the charities and voluntary sector. This means that users of the service can:

  • search the database to identify opportunities that match their project;
  • find niche funding opportunities that other funding searches typically miss;
  • narrow searches to funding available in specific geographic areas;
  • receive alerts about new funding opportunities tailored to their needs direct to their inbox;
  • get the latest news on funding.

The database is easy to use, with key eligibility criteria highlighted, and information on how to apply fully explained. There’s no jargon, and because all of the funding opportunities have been handpicked by MyFundingCentral researchers to be right for the sector, users can be sure that they are current and relevant to their needs.

A lifeline for the future

Over the past two years, the charities and voluntary sector has proved its resilience. Many charities and voluntary organisations have found ways of adapting to the restrictions caused by the pandemic, despite the challenges of increasing demands and falling incomes.

Now, as it emerges from the worst of the restrictions, the sector is facing a still uncertain future. The voluntary sector is a huge, diverse and vital part of our society, and now more than ever it needs funding to continue its work with and for communities.

For many charities, MyFundingCentral is already a lifeline for connecting to funding streams. It offers the sector a reliable and up-to-date resource that can point charities towards the funding they need.

For further information, and to subscribe, visit the MyFundingCentral website.

Photo by Towfiqu barbhuiya on Unsplash

Further reading: more about the charities and voluntary sector on The Knowledge Exchange Blog

Tackling health inequalities: what does the data tell us and how can it help?

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Health inequalities in Scotland are significant. Every year we hear about how Scotland has some of the biggest gaps in the health and wellbeing of the poorest and richest in society. In some cases, Scotland has the largest gaps in equality in the whole of Europe. And in many instances, they are rising. Scotland also has the lowest life expectancy of all UK countries.

A number of studies and research projects have been commissioned to try to identify the key indicators and factors that are creating and reinforcing these inequalities, and what sorts of interventions would work best to try and reduce or eradicate them altogether. It is hoped that by conducting research, and compiling data, policymakers can use this to identify groups and geographic areas where health inequalities are significant, and to intervene to reduce them, with data to help back up and evaluate the effectiveness of these interventions. In Scotland, work is being done by a number of organisations including the Scottish Government, Glasgow Centre for Population Health (GCPH) and Public Health Innovation Network Scotland (PHINS).

What indicators and factors are being measured?

Income inequality has a related impact on health inequalities, and the scale of low pay is significant. The relationship between health inequalities, poverty and household income is one which has been explored at length and is often highlighted as one of the main factors which influences health inequalities. Studies which look at income, and also at relative levels of deprivation can provide useful comparison points, with comparable datasets on employment status and income readily available at a national and local level. Data also considers trends over time, comparing pre- and post-economic crash data, as well as relative earnings and expenditure relative to inflation and the rising cost of living. Other factors include age (those under 25 and earning a lower minimum wage for example) and by gender, with more women in lower paid, lower skilled and part time or insecure work.

How usable is the research being created?

The research which examines health inequalities explores a whole range of interrelated factors, and highlights just how complex the landscape of inequalities is. Creating a clear and holistic picture of all of the factors which contribute to health inequalities is not easy. Many studies, while detailed and effective, are niche, and focus on a very limited number of factors across a limited demographic source. As a result, questions have been raised about the utility of this research and its applicability and scalability at a national level. In an attempt to tackle this, combined data sets are being produced which provide opportunities for comparison across data from a range of studies.

The “Triple I” tool from NHS Health Scotland is designed to help policy designers to create effective interventions to reduce health inequalities. A second edition of the tool is due to be released in 2018/19. Triple I aims to provide national and local decision makers with practical tools and interpreted research findings about investing in interventions to reduce health inequalities in Scotland. It does this by modelling the potential impact of different interventions and policies on overall population health and health inequalities.

 

What can be done to act on the data?

While the research being produced is high quality, and thorough in relation to findings, the real question is what can actually be done with the research, and what steps can policymakers and practitioners take to use the findings to inform their own practice.

There are, researchers suggest, significant opportunities presented by the recent research which has been done on income inequality. In particular, they cite the public sector and public sector pay as a key way to reduce the income, and therefore the inequality gap, particularly among higher earners and those who would be considered “working poor” or “just about managing”. In Scotland, significantly more people are employed in the public sector than in any other part of the UK, and there is, researchers suggest, an opportunity to better align and increase low wages to help to reduce the gap.

The adoption of new initiatives, such as the “housing first model”, which is due to be rolled out in Glasgow to help homeless people break the cycle of homelessness, are also opportunities not only to address inequalities, but to ensure that long term help and support is in place to prevent any relapse into chaotic or risky behaviour. In relation to housing first, the savings on front line services such as emergency admissions to hospital, or contact with the police after committing a crime are significant, and while more in depth research is needed to create a full cost benefit analysis model of the scheme and its effectiveness, early studies show that the impact on health and wellbeing on those who had previously been homeless is huge in terms of reducing inequalities and improving wellbeing. However further data on homelessness in Scotland shows how far we have to go, and that housing first is only one mechanism which can be used to begin this process of reducing inequalities among the most and least deprived communities in Scotland.

Alternatively, some have suggested a more radical overhaul of how we distribute welfare and wealth within the country. Research has been coming thick and fast on the subject of a “citizens basic income”, particularly following the trial which was rolled out in Finland (the findings of which have not yet been published). Research on how this could impact on inequalities is not widespread yet, as pilots have been small scale, However, it is suggested that a total overhaul of welfare, replacing it instead with a citizen’s basic income would be a more effective way to reduce inequalities across the board, including in health.

Summing up

Health inequalities are significant in Scotland. Much of the research focuses on the impact of deprivation, poverty and low income on health inequalities and how, in order to tackle health inequalities in Scotland we must also tackle some of the other significant social problems within our communities, including low income and insecure work, and the impact of homelessness or chaotic lifestyles on health.

Data can be used in a number of ways to help inform policy decisions, some more radical than others. But creating a complete understanding of inequality in Scotland is challenging. It is up to researchers and policymakers to work together to create a better understanding of the conditions and factors which contribute to inequality, and what can be done to help tackle systemic and entrenched inequalities in our communities through policy levers and evidence based policy making.

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Universal basic income: too good to be true?

A world of evidence … but can we trust that it is any good?

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Universal basic income: too good to be true?

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“I am now convinced that the simplest approach will prove to be the most effective – the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.” Martin Luther King, 1967

It may come as a surprise to learn that the current ‘hot topic’ of universal basic income (UBI) – also known as basic income or income guarantee – is actually over 500 years old.

It was first developed by radicals such as philosopher Sir Thomas More in the 16th century, drawing upon humanist philosophy.  It was mooted by Thomas Paine in the 18th century, and then again in the mid-20th century, by economists such as James Tobin and Milton Friedman.  In 1967, Martin Luther King called for a ‘guaranteed income’ to abolish poverty, and in the 1970s, a basic income experiment ‘Mincome’ was conducted in Canada.

However, only in recent years has debate on universal basic income (UBI) moved into the mainstream.

From the threat of job losses from automation and artificial intelligence, an overly complex and bureaucratic welfare system that has been branded ‘unfit for purpose’, to the failure of conventional means to successfully tackle unemployment over the last decade – basic income has been hailed as a key way to reduce inequality and provide a basic level of financial security upon which individuals can build their lives.

It has many current supporters – including billionaires Elon Musk, Mark Zuckerberg, and Richard Branson.  There is support among the general public too, with a recent poll reporting that nearly half of all adults aged 18-75 in the UK (49%) would support the UK Government introducing UBI at the level to cover basic needs in principle.

 

How does it work? 

In essence, UBI offers every citizen a regular payment without means testing or requirement for work.

Trials of different models of basic income have been conducted around the globe, including Kenya, Finland, and Canada.  There are also UBI trials planned in the district of Besós in Barcelona, Utrecht in the Netherlands and the Finnish city of Helsinki.  Closer to home, four areas in Scotland are also currently designing basic income pilots – Glasgow, Edinburgh, Fife and North Ayrshire.

While there have been many different models of basic income trialled and assessed over the years, in general, basic income schemes share five key characteristics:

  • Periodic: it is paid at regular intervals, not as a one-off grant.
  • Cash payment: it is paid in an appropriate medium of exchange, allowing those who receive it to decide what they spend it on. It is not paid in kind (such as food or services) or in vouchers with a specific use
  • Individual: it is paid on an individual basis—and not, for instance, to households.
  • Universal: it is paid to all, without means test
  • Unconditional: it is paid without a requirement to work or to demonstrate willingness-to-work

 

Anticipated benefits

The key anticipated benefits of the introduction of UBI is a reduction in inequality and poverty. However, advocates claim that it would also have many other benefits.  These include:

  • simplifying the existing welfare system (including efficiency gains)
  • reducing the psychological burden and stigma associated with welfare benefits
  • achieving more comprehensive coverage – no one ‘slipping through the net’
  • fixing the threshold and ‘poverty trap’ effects induced by means-tested schemes
  • enabling individuals to continue education and training, or retrain, without financial constraint dictating choices
  • making childcare arrangements easier
  • rewarding unpaid contributions such as caring and volunteer work
  • improving gender equality and help women in abusive situations
  • improving working conditions
  • addressing predicted future mass unemployment as a result of automation

 

Criticism

The key argument against the introduction of UBI is its cost – essentially that “an affordable UBI would be inadequate, and an adequate UBI would be unaffordable”.

Critics argue that if UBI were set at a level that enabled a modest, but decent standard of living on its own, then it would be unaffordable – either requiring much higher taxes, and/or the redistribution of funds from other areas, such as education or health.

However, if UBI was set too low, it would not provide an adequate income to live on, and it may be exploited as a subsidy for low wages by unscrupulous employers.

Others, such as economist John Kay, have argued that UBI simply would not have the redistributive effects intended.  Rather than improving the lives of those most in need, who would receive more or less the same as they do under existing welfare systems, it would instead provide more for the middle classes.

There is also some concern that UBI may undermine the incentive to work, and lead to the large-scale withdrawal of women from the labour market.

 

What does the evidence say?

Certainly, there is a beauty in the simplicity of UBI – and no one can argue against the goals of reducing inequality and poverty.  However, in truth, there just isn’t enough evidence available yet to judge whether or not the full-scale introduction of UBI would be successful.

While many pilots have demonstrated positive results, most have been of limited size and scope, and it is difficult to extrapolate these findings to the wider population.

Analyses by a wide range of organisations – including the RSA, the Joseph Rowntree Foundation, the OECD, and the International Monetary Fund, have drawn mixed results.

For example, a review conducted by Bath University in 2017 concluded that:

“The unavoidable reality is that such schemes either have unacceptable distributional consequences or they simply cost too much. The alternative – to retain the existing structure of means-tested benefits – ensures a more favourable compromise between the goals of meeting need and controlling cost, but does so at the cost of administrative complexity and adverse work incentive effects.”

Similarly, the IMF conclude that in the UK and France, UBI would be inferior to existing systems in targeting poverty and inequality. However, there are some aspects of UBI that are difficult to model, such as the behavioural impacts of having economic security.  Trials and experimentation are important sources of such information.

Thus, the planned trials of UBI in Scotland and elsewhere may well help to provide further answers.  And we – along with others around the world – will be watching with interest.

As First Minister, Nicola Sturgeon aptly puts it:

“It might turn out not to be the answer, it might turn out not to be feasible. But as work and employment changes as rapidly as it is doing, I think it’s really important that we are prepared to be open-minded about the different ways that we can support individuals to participate fully in the new economy.”

Follow us on Twitter to see what developments in public and social policy are interesting our research team.

Is the record high employment rate masking the reality of in-work poverty?

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wage-packetBy Heather Cameron

The employment rate may have hit a record high of 74.6%, with unemployment continuing to run at an 11-year low, but in-work poverty has also reached unprecedented levels.

More than half (55%) of people in poverty are living in working households, including millions of children, according to the latest Monitoring poverty and social exclusion (MPSE) report.

And new research for the Joseph Rowntree Foundation (JRF) published last week says four million more people are living below an adequate standard of living and ‘just managing’ at best.

Statistics

The findings of MPSE paint a bleak picture for a substantial share of the UK population. It notes that the proportion of the UK population living in poverty has barely changed since 2002/03, remaining at around 21%. And at 55%, those in poverty in working households has reached its highest level since the data set began in 1994/95.

Of this 55%, four fifths of the adults in these families are themselves working – a total of 3.8 million workers were living in poverty in 2014/15, an increase of around a million since 2004/05.

Female employees make up the single largest group within this group at 1.5 million, followed by male employees at 1.4 million. However, the majority of workers in in-work poverty are male (53%) as there were 620,000 male self-employed workers in poverty in 2014/15, while there were 250,000 female self-employed workers.

The story is different for workless households, however, as the proportion of people in poverty in these households has decreased, with the number in workless or retired families having fallen by half a million. Despite the significant increase in the number of people aged 65 and over, the figures show there are 400,000 fewer pensioners in poverty. There have also been reductions in the number of children in workless households.

While this is clearly encouraging, as the MPSE report suggests, it is difficult to categorise this as progress since there has been little change in the relative poverty measure overall.

Moreover, the new research from JRF warns that millions of just managing families are on the tipping point of falling into poverty as 30% of the population are living below the minimum income standard (MIS). In addition, 11 million people were found to be living far short of MIS, up from 9.1 million, who have incomes below 75% of the standard.

So what is causing these worrying statistics?

Contributory factors

The labour market has undoubtedly had some influence on these figures, with low wages and insecurity. Although average incomes have begun to rise, they are still below their peak. Male weekly earnings are still lower than 2005 levels and female weekly earnings, although now equal to 2005 levels, are still below what they were in 2010.  And with inflation expected to return, it has been suggested that hourly pay is unlikely to reach its pre-recession peak before 2020.

However, this is only part of the issue. There are also a number of other contributory factors, including:

  • increasing cost of living;
  • housing market failures; and
  • cuts in welfare benefits.

The increase in numbers living below an adequate standard of living has been driven by rising living costs while incomes stagnate. The price of a minimum ‘basket of goods’ has risen 27-30% since 2008, and average earnings by only half of this. The JRF analysis suggests the cost of living could be 10% higher by 2020, a period when much state support has been frozen.

Housing is also an important factor. It is often too expensive and of poor quality, particularly in the private rented sector. The MPSE findings show that the number of private renters in poverty has doubled over the last decade, with rent accounting for at least a third of income for more than 70% of private renters in poverty.

Households accepted as homeless and those in temporary accommodation have also increased and landlord evictions are close to a ten-year high.

Added to this, is the four-year freeze on benefits, tax credits and Universal Credit (UC), along with a reduction in the overall benefit cap. The benefit cap mainly affects households with children and will increase the number of families affected, from 20,000 to 112,000.

All this puts those on the lowest incomes at risk.

Way forward

Clearly, strong growth in the number of people in employment does not mean an end to employment-related disadvantage.

To help end poverty, the JRF has called on the government to make a number of changes, including:

  • reversing cuts to the amount people can earn before their benefits are reduced;
  • ending the freeze on working age benefits;
  • extending support to low wage sectors to reduce the productivity gap; and
  • investing in a living rents scheme to provide more affordable housing.

As the MPSE report concludes, “solutions for in-work poverty require more than just more work.”

If you enjoyed reading this, you may also like our previous articles on poverty.

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Gender pay gap – will it ever close?

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égalité des sexes

By Heather Cameron

Last Thursday was labelled ‘Equal Pay Day’ – the last day of the year women effectively stop earning relative to men – just one day later than the previous year.

According to the Fawcett Society, this means women are in effect ‘working for free’ until the end of the year as a result of the gender pay gap.

Given that it is 46 years since the Equal Pay Act was introduced ‘to prevent discrimination, as regards terms and conditions of employment, between men and women’, it is dispiriting that considerable inequalities remain between men and women’s pay.

How much of a gap?

The Fawcett Society has calculated the current gender pay gap for full-time workers at 13.9%.

Recent research by Deloitte suggests that the gender pay gap will not close until 2069 unless action is taken to tackle it now. It shows that the hourly pay gap between men and women is closing at a rate of just 2.5 pence per annum, and in some cases is even widening.

The study also notes that men receive considerably higher average pay even in female-dominated occupations, such as teaching and caring.

And new research from New Policy Institute (NPI) found that, although things have been improving with higher employment rates and increases in earnings, the formal employment rate for women is still lower and female weekly earnings are still less than 70% of male weekly earnings.

The research also highlighted that significant barriers continue to prevent women entering the labour market, particularly when it comes to high-paid, secure, quality jobs.

The overall global situation would appear even worse as the most recent Global gender gap report from the World Economic Forum indicates that the gap could take 170 years to close.

In terms of the economic impact, the gender pay gap has been highlighted as a particular issue in relation to the UK’s low productivity problem.

It has been suggested that equalising women’s productivity could add almost £600 billion to the economy, and that 10% could be added to the size of the economy by 2030 if the millions of women who wanted to work could find suitable jobs.

Causes

The gender pay gap has been attributed to four main causes by the Fawcett Society:

  • Discrimination – often women are still paid less than men for the same job and unfair treatment remains common, especially around maternity
  • Unequal caring responsibilities – women continue to play a greater role in caring for family
  • A divided labour market – women are more likely to be in low-paid and low-skilled jobs
  • Men in the most senior roles – men continue to make up the majority of those in the highest paid and most senior roles

Deloitte’s research similarly highlights that women are disproportionately more likely to enter low paid industries or sectors.

However, it emphasises that one contributory factor to the gender pay gap occurs before labour market entry, when boys and girls decide what to study at school and in further education. Three times more boys than girls take computing and 50% more boys than girls study design and technology.

This is significant because the gap in starting salaries between men and women who have studied Science, Technology, Engineering and Mathematics (STEM) subjects, and who go on to take jobs in these sectors, was found to be far smaller.

Way forward

Deloitte’s research therefore suggests that increasing the participation of females in STEM subjects and careers could help reduce the gender pay gap.

Nevertheless, it also notes that as there are several causes, no single measure will be enough to eradicate it.

The government’s policy to introduce mandatory gender pay gap reporting for all large companies employing more than 250 employees has been welcomed as a step forward. But there are concerns this is not enough. The NPI research suggests that it could go further, with extension of the duty to companies employing 50 people.

In addition, encouraging take-up of the voluntary living wage and boosting pay in sectors that have been traditionally low paid and have predominantly employed women are suggested as ways to help speed up the reduction of the gender pay gap.

The NPI report calls for ‘a multi-dimensional policy response, sitting underneath a clear gender focused employment strategy’ to reduce gender inequalities and the subsequent pay gap.

If you enjoyed reading this, why not take a look at some of our other posts on equalities issues

Follow us on Twitter to see what developments in public and social policy are interesting our research team.

Rising household debt: a real risk to the economy?

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pink pig and coins

While household debt is still below its pre-crisis levels, it began to rise relative to incomes in early 2015 and remains high by historical and international standards, according to the Bank of England.

With the current uncertainty surrounding the economy following the EU referendum, there are concerns that household indebtedness could present a big risk to the UK economy.

So what do the statistics mean and just what impact could they have on the economy? A recent House of Commons briefing paper highlights the latest statistics and forecasts for household debt in the UK, including international comparisons, and the effects on the economy.

The statistics

The level of household debt more than doubled from £725 billion in early 2000 to £1,600 billion in late 2008. The global financial crisis resulted in a decline in the household debt-to-income ratio, however, from 168% at its peak in early 2008 to just over 140% in recent years. The levels of debt have increased again over the last couple of years, with annual rates of growth of around 3% recorded since 2014.

The Office for Budget Responsibility (OBR) forecasts that the household debt-to-income ratio will increase in coming years, peaking at 167% at the start of 2020, close to the pre-recession peak. However, this has been revised down on earlier forecasts, such as December 2014, when it was forecast to reach just under 184%.

Despite these increases, the costs of household debt is expected to remain low relative to household income, and much lower than pre-recession levels, due to continued low interest rates. As a result, the debt burden is more affordable for households.

Benefits

The negative effects of debt on individuals has been highly publicised, but low levels of household debt can also provide benefits to individuals and the economy, as highlighted in the briefing paper:

“It allows people to buy things, like a house, that they would not be able to pay for in one go, raising their standard of living. In other words, it allows people to smooth their consumption over time, including during periods when their incomes temporarily fall. This can provide stability to the economy.”

Consumer spending can obviously be good news for retailers and the high street and high levels of mortgage approvals is good for the housing market.

The paper highlights evidence that the accumulation of household debt from 1996 to 2003 contributed to economic growth, with indebted households adding roughly 0.35% points a year to overall consumer spending growth of about 4.5% per year over this period. So a total of 2.5% was added to the level of consumer spending from 1996 to 2003.

Nevertheless, higher levels of debt can make households more vulnerable if an economic downturn occurs. And as the briefing paper shows, the households most likely to have debt (excluding mortgages) are those in the lower wealth quintiles – who are already vulnerable.

Economic impact

As the Bank of England has warned, the ability of some households to service their debts would be challenged by a period of weaker employment and income growth, which could have a wider economic impact through reduced expenditure. And higher interest rates may also lead to further reductions.

This could then have a knock-on effect on businesses which, faced with reduced revenues, may have to cut back on costs such as labour costs by reducing wages or the workforce.

Indeed, research on the impact of household debt on the economy highlighted in the briefing paper suggests that large increases in household debt prior to recessions tend to lead to longer and more severe downturns. And this is as a result of households with high debt levels cutting back on their spending by more than other households during and after a recession.

According to a 2012 OECD working paper, high debt levels can create vulnerabilities by impairing the ability of households and companies to smooth their spending and investment.  The paper also found that when household debt levels rise above trend, so does the likelihood of recession.

Other research has also found that large increases in household debt have preceded more severe and protracted recessions. And recovery following a recession was found to be typically slower in countries that carry the legacy of a large private credit boom.

Final thoughts

So it would seem that perhaps a certain extent of household indebtedness is good for individuals and the economy, in terms of maintaining growth. But when it rises above a certain level in relation to incomes, the evidence suggests it becomes a serious concern.

And with the current economic uncertainty, increasing household debt isn’t something to be ignored.

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Basic Income – a simple solution to a complex problem?

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By Heather Cameron

“If you want to incentivise work at every level of income then Basic Income is simply the best system.” (RSA, 2015)

Last month MPs in the UK Parliament were asked to consider the question of introducing a universal basic income to be payable unconditionally to all citizens without means-testing or work requirement.

The motion, which was tabled by Green Party MP Caroline Lucas, says the policy “has the potential to offer genuine social security to all while boosting entrepreneurialism”.

While no vote was taken on the policy, and it is unlikely to be made law any time soon, the motion raised the profile of the issue by enabling MPs to add their name in support.

And with ever increasing global interest in the idea, and basic income pilots set to spring into action all over Europe this year, perhaps it’s not as far away from becoming a reality in the UK as we may think.

Pilots

A number of cities and countries across Europe have committed to trialling a basic income.

Last year Finland announced a national basic income experiment, scheduled to start in 2017, which will be the EU’s first nation-wide project. It will see up to 100,000 Finnish citizens paid an unconditional income for a period of two years, after which the results will be analysed to see whether it should be rolled out nationally.

Trials have also begun in the Netherlands. The Dutch city of Utrecht will pay a small group of benefits claimants, whether they work or not, a basic income of £660 a month to provide a basic standard of living and help them avoid the ‘poverty trap’.

In Switzerland, a national referendum on a basic income is planned for this year, and support for the idea has also been reported in France and Canada.

While it is too early to tell whether these pilots will have the desired positive effect, the concept of a basic income is far from new and there have been signs of success from past experiments.

Positive outcomes

In the 1970s, a basic income social experiment, ‘Mincome’, was carried out in the Canadian town of Dauphin, which involved making payments to the entire population, relative to income to cover basic living costs. The programme succeeded in reducing poverty, improving health and alleviating other urban problems.

More recent basic income projects in developing countries have also helped alleviate poverty. In Namibia, a coalition of aid organisations trialled a basic income, funded through tax revenues, of 100 Namibian dollars to each citizen. The result: crime was reduced, children attended school and many villagers used the money to fund micro-enterprises. Meanwhile, in Uganda, a similar programme increased business assets by 57%, work hours by 17% and earnings by 38%.

Critics of such a system say that it would cost the state too much money, and would lead to welfare dependency and a reluctance to work, ultimately resulting in higher unemployment.

A recent survey undertaken in Switzerland would seem to refute this. It indicates that only a very small proportion of the population would stop working if they had a basic income and a majority believe that it would “relieve people from existential fears.”

Similarly, the Canadian experiment found no substantial difference in either female or male unemployment. There were changes in the labour market, as would be expected, with a reduction in working hours within families as a whole. Female spouses reduced their working hours to spend more time with children; and hours were reduced for adolescents within the family who entered the workforce later, suggesting that they were able to stay in education longer.

Way forward for the UK?

The Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) has recently concluded that there is a strong practical case for basic income in the UK to replace the current tax and benefits system – “it underpins security, replaces the complexity of the current system, and provides a platform for freedom and creativity.”

The RSA report sets out a potential basic income model for the UK. It would provide a universal payment to every citizen, (with restrictions for migrants and those serving custodial sentences). A ‘basic’ amount paid to everyone of working age would provide incentives to work, therefore mitigating against low pay traps of the current system. It would also, the RSA report claims, mitigate against some of the negative distributive effects of basic income schemes by redistributing from higher earners to families with children.

The report calculates household income, comparing the proposed model with the current system of likely Universal Credit/National Living Wage income for 2020/21. In all instances, ranging from single parent families with children under or over five to couples with children under or over five, there was a gain for household income under the basic income model.

With the current welfare system and all its complexity, the new Universal Credit apparently not doing what it’s supposed to and the continued increase in job automation, is this really just a simple solution to a complex problem?

Perhaps by the end of 2016, there will be more evidence for the UK to seriously consider.

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Further reading: if you liked this blog post, you might also like:

Zero future for zero hours in a fair economy?

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By Stacey Dingwall

The Office for National Statistics (ONS) has released its second annual update on the number of people employed on zero hours contracts, which suggests that in August 2014 UK firms were employing 1.8 million people on such contracts.

What is a zero hours contract?

According to Acas, the term ‘zero hour contract’ (although not defined in legislation) can be understood as “an employment contract between an employer and a worker, which means the employer is not obliged to provide the worker with any minimum working hours, and the worker is not obliged to accept any of the hours offered”.

Use of the contracts has been a highly controversial issue in recent months, with high-profile retailers such as Sports Direct (who employ 90% of their part time staff on zero hours contracts) coming in for criticism of their “exploitation” of their employees. The sports retailer is also facing legal action from hundreds of their workers due to their exclusion from the company bonus scheme, thanks to the nature of their contracts.

Increasing or not?

The ONS’ first Analysis of Employee Contracts that do not Guarantee a Minimum Number of Hours found that between January and February 2014, 1.4 million UK workers were employed on zero hours contracts. Despite the inevitable headlines depicting the new figure as a direct increase from the 2014 analysis, the ONS was careful to warn against this in its latest analysis, noting that it covers a different time of year than the first release therefore the number of contracts reported may be affected by seasonal factors.

The latest release also includes data from the Labour Force Survey (LFS), which indicates that the number of people employed on zero hours contracts in their main employment, between October and December 2014, was 697,000 or 2.3% of all people in employment. The figure for the same period the year before was 586,000 or 1.9% of people in employment although again, the ONS are careful to stipulate that they can’t be certain how much of this ‘increase’ is due to greater recognition of what constitutes a zero hours contract, as opposed to new contracts.

The Economic Research Council suggested that a lot of the jobs that have been created recently have come with much less security and guaranteed pay. And the UK Commission for Employment and Skills have noted that 33% of people on zero hour contracts would like to work more hours (either in their current job or in a different one), compared to just 13% of people not on a zero hour contract.

Zero hours and the general election

The issue of the use of zero hours contracts looks set to become a key feature of parties’ campaigns in the upcoming general election. Current Secretary of Business, Innovation and Skills – Liberal Democrat Vince Cable – has already put forward legislation (clause 151 of the Small Business Enterprise and Employment Bill, currently before the House of Lords) which would see exclusivity clauses in contracts (which prevent those employed on zero hours contracts from seeking additional work to supplement their income) banned.

The Conservative Work and Pensions Secretary, Iain Duncan Smith, has however defended the contracts, arguing that they “provide people with a flexible way of working and the freedom to arrange jobs around other commitments” and “allow employers to be competitive in response to market trends”.

What of the other parties? Labour has vowed to “end exploitative zero hours contracts” and introduce “new rights” to employees on such contracts, however has stopped short of proposing to ban employers from offering them altogether. Somewhat embarrassingly for the party, figures released by the Independent Parliamentary Standards Authority (IPSA) and seized on by the tabloids, have indicated that over 30 Labour MPs employed staff on zero hours contracts in 2014.

The Green Party is firmly against the use of zero hours contracts altogether: leader Natalie Bennett has been calling on the government to place an outright ban on them since 2013. UKIP leader Nigel Farage has also criticised the long-term use of zero hours contracts by employers, and has called for large employers to be subject to a code of conduct as to how they are applied.

Zero hours contracts aren’t a financial necessity

In these times of budget cuts, many local authorities have argued that they have no choice but to offer some of their workers zero hours contracts. One area in which this has been particularly prevalent is in the provision of social care, with some employees paid on a ‘time and task’ basis, i.e. only for the amount of time they actually spend with a client, which can be as little as 15 minutes in some cases.

In 2012, Southwark Council took the decision to move away from this approach, after feedback from care workers and service users indicated that it did not allow workers to carry out their duties with the required level of compassion. The Council carried out a review of their homecare services and found that extending the length of visits greatly helped in keeping service users healthy in their own homes and out of hospital and residential care. It also noted that the costs of providing longer visits had been ‘passed on’ to their care workforce over time through the use of zero hours contracts and, wishing to end this, announced that from October 2014 they would be eliminating their use altogether, and offering guaranteed hours of employment to their staff.

Immediate reaction to the release of the latest figures has been plentiful; it now remains to be seen whether it is reflected in party campaigns in the forthcoming general election.

The Idox Information Service has a wealth of research reports, articles and case studies on zero hours contracts and other employment issues. Items of interest include:

The decent jobs deficit: the human cost of zero-hours working in the UK

Give and take? Unravelling the true nature of zero-hours contracts

Zero hours contract: not all bad news

Zero-hours contracts: myth and reality

Flexibility or insecurity? Exploring the rise in zero hours contracts

Addressing the causes of in-work poverty

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Image from Flickr user MoB68, licensed for reuse under Creative Commons License

Image from Flickr user MoB68, licensed for reuse under Creative Commons License

By Donna Gardiner

This week is Living Wage Week and the issue of workers struggling to make ends meet has been in the news again. Back on 23rd September 2014, I attended an event held by the Glasgow Centre for Population Health (GCPH) on the changing nature of work and in-work poverty in the UK, with a specific focus on Glasgow.

Over 100 delegates from across the public, private and voluntary sectors came together to learn about the latest research findings, take part in round table discussions and contribute to a panel debate on how to address the causes of in-work poverty. Speakers included experts on poverty from the Scottish Government, Glasgow City Council, Ipsos MORI, the Employment Research Institute at Napier University and the Glasgow Centre for Population Health.

The day began with a presentation by Jill Morton, from the Communities and Analytical Services division of the Scottish Government. Jill provided an overview of the Scottish Government’s policy commitments to tackle poverty, and highlighted recent statistics regarding the incidence of poverty in Scotland.

She reported that, in Scotland in 2012/13 (the most recent data available), 16% of people, and one in five children, were living in poverty.

Jill noted that whilst employment was the best route out of poverty, it was no longer a safeguard against poverty as over half of all working age adults in poverty in Scotland were from households in which at least one person was in employment. Six in ten children in poverty were also from working households. Jill concluded that for poverty to decline, lower income households must have access to quality and sustainable employment.

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