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Three Income Maintenance Options for 2021


Publication date

27 Jan 2021


The Covid-19 pandemic has inflicted serious damage on the economy, on employment, and on household disposable incomes. The UK Government’s job retention and income maintenance schemes have mitigated some of the damage, and the increasing availability of vaccines will slowly bring the pandemic under control, allowing lockdowns to cease and the economy to return to something like normal: but it will take months, and possibly years, for the economy to recover, and maybe even longer for household disposable incomes to return to adequacy. Globalisation, automation and the pandemic will all have reduced the security of both employment and household disposable incomes, perhaps permanently. Maintaining household incomes, and increasing their security, will be a crucial function of government. This research note evaluates three options for maintaining incomes during the financial year 2021-22: a continuation of the £20 increase in the levels of Universal Credit and legacy benefits; an increase in Child Benefit that would cost the same as a continuation of the £20 Universal Credit and legacy benefit increase; and a revenue neutral Basic Income scheme. Of the three options tested, the most effective at increasing income security, reducing poverty and inequality, and removing households from means-testing, would be the Basic Income scheme. As an interim measure, increasing Child Benefit would be preferable to retaining the increase in Universal Credit and legacy benefit rates.


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