Dr Clare Chambers-Jones is a Senior Law Lecturer at The Open University and has a background in financial exclusion and banking regulation. Her work has focused on banking crises, the regulatory response to crises over time and exploring whether a historical approach could enlighten regulatory responses.
Clare’s work is currently examining the thinking that novel regulatory and policy-responses are at the heart of eradicating poverty. Her work will be exploring the multifaceted life of poverty which cannot be seen in isolation. She explores how a range of factors keep people stuck in a cycle of poverty, such barriers surrounding education, limited access to electricity, water and food, unemployment or low wages, gender inequality, lack of infrastructure and political discourse.
COVID-19 has caused the world to pause, to think and revaluate. It is questionable as to how long these reflective pauses will last as the world struggles to hold together, economic, social, political and overall wellbeing of its people. This is the time to nurture any positive momentum we can find in any discipline to help secure a brighter future post COVID-19. There are dark days economically ahead with no doubt. Consumers and businesses are going to struggle, and some will falter. Jobs, homes and businesses will be lost. Unemployment will be up, debt will increase, personally and nationally. But where can we find shards of light and start to rebuild our economy and prosperity? How can we innovate in new ways? Do we need to find an alternative mechanism of regulation? Can we find a better way to regulate finance and the economy so that lessons learnt are not repeated? Can we put in place policies that prevent people falling into poverty and use this as an opportunity to lift thousands of people out of it? Will those in power rise up to the challenge of choosing an alternative path, or will they always pick the same well-trodden path? It is argued that there must be a rethinking of the economic, social, environmental and political landscape to demonstrate that change can happen, but it is time for us to be brave.
The UK economy, like others is cyclical. There will always be booms and busts, yet this potential ‘bust’ is very different. It is not bought about by an erroneously regulated housing market, nor a rambunctious banking culture, nor even by tumultuous financial criminal activity. We can see it slowly coming. We can predict it and see the tidal wave of economic downturn approaching. At the moment we are in the hiatus. We are watching and waiting. In fact, things did appear to first be quiet. In April 2020 consumers paid off record amounts of consumer debt, £5bn of which related to credit card debt within the UK. A total of £7.4bn worth of consumer debt was cleared from credit cards. This negated the record decline in retail spending during the COVID-19 lockdown, where consumers were able to spend money that normally would have be spent on eating out, cinema trips, drinks in bars, outings with friends and clothes purchased, for example.
The quietness turned into the rumbling of the economic downturn moving towards us. The way consumers spent their money during lockdown directly related to their economic position. For some people they were able to work from home and carry on in the new normal. Others were furloughed and had several months of relative security knowing that at least 80% of their wage would be covered. For others, COVID-19 meant job losses and no possibility of employment. For these the economic downturn started straightaway. The other two groups were able to budget, to spend and to repay debt if they chose to. For some, life would be tough. For others, it would collapse.
The future is loud, it is screaming that economic downturn is apparent, it is real and its effects will be felt. The economy is predicted to shrink by 12.4% in 2020. Make no mistake, this is massive and there is really nowhere to hide. People are going to suffer, the gap between the rich and poor will grow. However, help is being provided on an unprecedented level such as payment deferrals, an increase in Universal Credit payments, mortgage holidays, low-interest business loans, furlough schemes, a £750m grant for charities supporting the most vulnerable and a 60-day breathing space period being introduced in 2021, to name a few.
Rishi Sunak, Chancellor, has enacted “whatever it takes”, measures since the outbreak of COVID-19 and initiated support packages. In the Chancellor’s Summer Statement more initiatives were announced to try and ‘kick start’ the economy such as eat out vouchers and a holiday for stamp duty. These are useful for some, but fail to address the fact that so many people are in poverty, with COVID-19 threatening to plunge them further into it. It is estimated that six million people have fallen behind on a household bill due to COVID-19. Four million people have fallen behind on rent, council tax or phone bills. These figures and peoples’ decline into poverty is linked to the way people work. It is argued that 43% of people on zero-hour contracts have fallen behind on a bill. Those living in poverty or close to being in poverty will sink further into an economic abyss. The injustices of low-wage poverty demonstrate how precariously many people live their lives.
Globally, poverty is and always has been a major issue but now the World Bank is indicating a further 71 million people will fall into it. India has been highlighted as a country of grave concern. The impact will be long lasting and severe.
In the last recession there was a plethora of academic debate on the pitfalls of regulations and political parties’ management of the crisis. There will be again this investigation into what went wrong and right, but we are in a unique position to restructure our thinking and to create regulation and policy in such a way that we can help to close the poverty gap, reduce consumer debt, and rethink how we manage finance and debt. The world has had to entirely rethink social interaction and close its doors for months, why should a consumer debt and poverty policy rethink, not be this shard of light that could come out of COVID-19? This is an opportunity to rethink economic, social and political policies in order to help tackle poverty. The current government policies are a reflection of the short termism regulation that is seen during financial or indeed any crisis, but we have an opportunity to rewrite policies on, but not exclusive to:
a rethink on zero-hour contract;
tackling the gender pay gap;
severe and extreme poverty
cultural and social attitudes to poverty, domestically and internationally;
support for renters;
increasing child benefit;
lower thresholds for benefits and expedite these payments;
grass roots financial help for families;
increase and restructure mortgage holidays;
help manage utility bills;
support with council tax;
government help with restocking food banks;
guidance for banking and credit agencies and
emotional and mental wellbeing support for children and adults.
It is suggested that we need to think in terms of long-term regulation, to stick with a policy. More than ever we need to be thinking globally. Policies need to be harmonised, political one-up-manship needs to be set aside so that people, globally as well as nationally, can begin to see green shoots of recovery. Let’s start again, let’s see what humanity can do. Bravery is needed so that we do not follow history in terms of regulation. We need to forge a new future where 71 million people in the world are lifted out of extreme poverty. Humanity can do this, people can change the way history is written. Let’s not control and regulate like we have done in the past. Let’s work together to find a new way. Let’s make COVID-19 the starting point of a more positive future for billions.