Written by Serena Hayre, BSWN Research Intern
This is a summary of the impact of the government’s spring budget on Black and Minoritised people and the changes to taxes, benefits, and public spending.
Overview
Since the release of the autumn budget, the UK has seen a rapid increase in the cost of living with prices increasing by 6.2% in the 12 months prior to February 2022 (The Office For National Statistics, 2022). This is expected to rise to 9% by the end of the calendar year. This price increase has been caused, in part, by the emergence of the Russia-Ukraine conflict with energy and fuel being key drivers of inflation. This level of inflation has not been seen for over 30 years with previous consequences being unemployment rising over 10% (The Office for National Statistics, 2019).
Alongside these widespread factors, Black and Minoritised groups are still recovering from the disproportionate health and employment effects of the COVID-19 pandemic. People of Black ethnic backgrounds had the highest COVID mortality rate and are also the ethnic group most likely to earn under £600 a week. This causes further concerns for Black and Minoritised groups.
About Us
BSWN is a Black-led racial justice organisation based in Bristol which aims to build dynamic, independent, and strong Black and Minoritised communities, businesses and organisations that are enabled to flourish whilst challenging systemic racism. Through our research, policy, business support, and cultural inclusion work, we have developed a delivery model which is centred on our solutions-finding racial justice incubation hub where new socio-economic models are developed in collaboration with the Black and Minoritised entrepreneurial communities across the region. This approach has created an impetus for transformation in policy decision-making, backed by actionable programmes for implementing sustainable change.
The Cost of Living
““A median earner, on around £27,500 a year will be about £360 worse off in the next financial year than in the current year””
With prices expected to rise by 9% by the end of the year, the impact on the cost of living is vast for all societal groups. However, when looking at Bristol’s unemployment levels, we can see that ‘non-white’ residents are 5.8% more likely to be unemployed. This, alongside the fact that 8 out of 9 ethnicities see an average hourly pay lower than that of White British counterparts implies that minority groups will be harder hit by the rise in prices (Race Disparity Audit, 2021).
From April 1st Ofgem have announced a 54% increase in the price of energy which will continue to push household expenditure higher. A government pledge was therefore made for the rental sectors’ minimum energy efficiency increase. With renting being 3 times more likely for ethnic minorities, this will likely come as a welcome form of assistance.
The National Insurance payment threshold will increase from £9,880 to £12,570 meaning that around 70% of people will pay less of their monthly income via this channel.
By 2024, Income tax will be cut to 19%. This will go some way in providing leeway for people’s budgets however, those facing immediate pressures to pay for rising bills and the increased price of goods will have over 2 years to see the benefits of this policy.
A 12-month cut on diesel of 5p per litre was announced. Whilst rising fuel prices have been causing extra expenditure for many households, White people are consistently more likely to have access to a vehicle than all other minorities. This means that the price drop will not reduce the spending of most ethnic groups and will have no effect on their quality of life.
A proven way to reduce inflation is to increase interest rates. The Monetary Policy Committee has decided to increase the interest rate to 0.75%. Whilst this should slow inflationary pressures, it creates unfavourable borrowing conditions for those who rely on loans, overdraft facilities and other forms of credit. With 42% of Black and Minoritised consumers reporting their financial situation had worsened during the pandemic and 11% of Black and Minoritised consumers having to use savings to cover loan repayments (Financial Conduct Authority, 2021), these communities will see direct increases to repayments and potentially become excluded from the credit market.
With inflation set to be back to the target of 2% by 2026, there will be a long and difficult road ahead for those on lower incomes which, as discussed, is more likely to be those in Black and Minoritised communities.
Health
With the recent Government decision to deprioritise the COVID-19 pandemic, the future of the NHS is becoming increasingly uncertain. The end of free mass testing could cost nurses as much as £50 per week (Nursing Notes, 2022) as the requirement for twice weekly testing still stands for those in healthcare.
Furthermore, with just over 20% of doctors feeling overwhelmed almost every day (Lacobucci, 2022), the budget outlines a plan to increase NHS efficiency which is likely to put unnecessary extra pressure on healthcare staff. With those of Asian heritage accounting for 10% of NHS staff yet only 7.2% of the workforce, the increase in efficiency will affect those in Black and Minoritsed community’s disproportionality. Whilst this efficiency increase is expected to create £4.75 billion of funding, this plan will create unnecessary pressure for minority groups. With Black and Minoritised communities reporting higher stress levels, anxiety, and depression symptoms during the pandemic (GOV.UK, 2021), adding extra responsibilities in the healthcare sector is likely to increase the gap in wellbeing.
The Spring budget outlines £151.8 billion to be spent on the NHS however, there is no money ringfenced for COVID-19 precautions. With the pandemic being likely to cause “long term and severe (..) health and wellbeing impacts” (Public Health England , 2020) for those in Black and Minoritised groups, there is a lack of attention to those most affected.
Education and Employment
The government boasts a strong labour market with the “total number of pay-rolled employees now 600,000 above pre-pandemic levels.” However, with 7.7% of those from ethnic minorities being unemployed in February of this year, minority groups aren’t sharing in the prosperity outlined by the budget.
The National Living Wage is set to increase by 6.6% to £9.50 per hour. Whilst this policy looks preferable, the wage increase is not in line with the cost of living which is set to rise by 9%. With over 10% of workers from Bangladeshi, Pakistani and Black backgrounds earning at the minimum wage, this effective loss in income will impact the ability of minority groups to cover essential costs (GOV.UK, 2021).
26% of Bangladeshi and 23% of Black families receive income related benefits whereas only 16% of White households depended on the same support. The budget outlines the plan to decreases the Universal Credit taper rate from 63% to 55% and increase work allowances by £500. This means that the threshold at which the credit is taken from a claimant will increase and once the threshold is crossed, less of the benefit will be taken. Whilst on the surface this looks positive, it again is not in line with the cost of living and will limit the expenditure of those already struggling.
Similarly, under the Way to Work campaign the time for claimants of Universal Credit to find employment is reducing from 3 months down to just 4 weeks. In the Southwest 0.7% of White people claim Job Seekers Allowance compared to 1.1% of people with an ethnicity other than white. This change to claimant time will therefore affect those of non-white background at a greater rate.
With the tuition fee repayment thresholds not moving in line with average earnings, university leavers are paying around £110 a year more than expected. With only 8.7% of all 2019-2020 undergraduate entrants being Black, there is evidence of an ethnic gap in higher education. With student loan repayments increasing, it is likely to reduce social mobility and deter those in low-income households from undertaking degree courses. This will have long run effects on their career prospects and widen the already existing gap.
Conclusion
The disproportionality in outcomes between White and Black & Minoritised people remains widespread, with devastating impacts on individuals and their families. Covid has put a strain on already underfunded support services. If the government does indeed wish to bring about “real and lasting change” then it must commit to secure, long-term grant funding for specialist Black-led services and organisations.
Recommendations
Wages and Universal Credit to increase at the same rate as the cost of living
Commitment to a proportionate long-term response and our early involvement in designing solutions. All sectors and public institutions need to acknowledge the unprecedented socio-economic impact of COVID-19 on the economic status of Black and Minoritised communities and build in short, medium and longer-term proportionate policy and investment proposals, given that the impact of coronavirus has widened and deepened existing patterns of racial inequality. Economic interventions and solutions should be designed with the earliest engagement and dialogue with Black and Minoritised voices, to bring their broad and close understanding of being at the sharpest end of COVID-19 to what can work at a practical level to remove barriers and revive economic activity.
Targeted Support for Black and Minoritised-led Organisations and Businesses by investing in a targeted programme of support across all Black and Minoritised sectors that provides advice and support in applying for financial assistance from the available schemes and regular and up-to-date information as the situation changes.
Funding & Investment to contributing to economic recovery by creating an inclusive matrix of support, including grants, wage subsidy and micro-loans, for those small Black and Minoritised-led charities and voluntary organisations, start-ups and new businesses that fall out of the current eligibility criteria and definitions for public sector loans and social investment.
Focus on the local economy by broadening the understanding of how local economies really work beyond the limited lens of the Business Rate System by including all sectors including: home workers, night time economy, responses to local transport needs and the retail sector - to provide a realistic 3D picture of local businesses and economic activity so that support mechanisms can be in place to foster sector diversity, good practice in sustainability, and inter-dependence in the process of economic recovery.