The Chancellor is facing calls to make the Covid furlough scheme permanent to help manage unemployment and protect people from poverty.
Think tank the Resolution Foundation said the Covid crisis has highlighted huge gaps in the welfare state, including the low level of the basic safety net for families.
It has called for a new 'earnings insurance' - where benefit entitlements are linked to previous earnings - for those experiencing a period of unemployment.
The report comes as figures show average household incomes remained broadly flat in 2020, despite the biggest annual economic contraction in over 300 years. This was the result of a radical shake up of Universal Credit and the SEISS schemes which, combined, have cost the Treasury £82billion in the past year.
Before the pandemic one-in-four families receiving Universal Credit had reduced their food intake due to a lack of income. During the pandemic, the Chancellor addressed this in the form of a £20 a week Universal Credit uplift.
The think tank said this should be levelled up for under-25s while the child element of Universal Credit should be increased by £5 a week.
The report says that the biggest – and arguably most popular – crisis welfare change has been the introduction of earnings insurance via the JRS and SEISS.
It said that permanently moving to a new system of earnings insurance – where unemployment support is paid at 80% at previous pay for three months – would cost the Treasury £900million a year.
This policy would mean those losing their jobs are automatically protected in future economic downturns, rather than having to rely on governments redesigning unemployment support in every crisis, said the Foundation.
The introduction of earnings insurance could also help address the lack of eligibility of Statutory Sick Pay (SSP), which excludes 2million employees and is worth less than a quarter of a typical salary.
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Making sick pay available to all employees at 80% of previous earnings would cost around £3.1billon a year, if the Government covered 60% of firms’ costs, it said.
Mike Brewer, chief economist at the Resolution Foundation, said: “After a decade of cuts and reinvention via Universal Credit, the UK’s welfare system has been upended again by the Covid-19 pandemic.
“But the safety net that millions of new welfare recipients have relied upon, from furloughed workers to first-time UC claimants, has been very different – and far more generous – than the system the UK had in place pre-Covid.
“The big challenge now is whether the UK’s post-pandemic welfare system should retain welcome new elements such as earnings insurance, and address key problems such as the low level of the basic safety net and sick pay. Simply returning to the old system is not good enough after what the country has gone through.”
A Government spokesperson said: "Our extensive, emergency measures have supported people throughout this pandemic and in the face of unprecedented disruption to the jobs market.
"As restrictions are eased, we know that getting into well-paid work is the best way to boost household income which is why our multibillion-pound Plan for Jobs is already helping people re-join the workforce."
