For all its seaside delights, Margate in Kent is one of the most deprived parts of the UK. Amid the cost of living crisis, many families are struggling to make ends meet.
Falling ill can become a headlong plunge into poverty – as Kyra Lloyd, a 25-year-old shop assistant, discovered when she began experiencing agonising pain in her ankle and she was left unable to stand.
“I started getting some very horrible, horrible pains. My foot was completely swollen, I couldn’t move.”
Doctors told Kyra the metalwork holding her bones together since a childhood fracture had snapped – and without surgery she could end up permanently in a wheelchair.
During the long wait for treatment she was signed off work. But statutory sick pay barely covered half her rent – let alone any other living expenses.
“I’m in so much debt now because of it,” she says.
“I have about £3,000 in debt from borrowing from people and getting loans because I just couldn’t afford to live. I couldn’t pay my rent. It’s just not enough.
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“It’s embarrassing to ask people when you can’t even afford to eat.
“I ended up having just gravy and bread for dinner because I just couldn’t afford it – the question was do I have a roof over my head or food? No one should have to choose.
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“Even things like washing your clothes… I was having to wash them in the bath at one point because I just couldn’t afford to use that much electricity. It’s so difficult. It’s not right.”
Kyra has now recovered and has a new job, but she’s constantly worried about the pain coming back.
“Every time I feel a slight twinge in my foot, I think – I can’t afford to go back on sick pay, I can’t afford another surgery. It’s a huge stress.”
Image: Statutory sick pay will only cover a quarter of Christopher Balmont’s normal income
Christopher Balmont, 57, has been working as a head chef in a restaurant for more than a decade. His partner is unable to work as she cares for their daughter, who has special educational needs.
Earlier this week, he was signed off work with depression and anxiety. Statutory sick pay will only cover a quarter of his normal income – and the stress of how to pay the bills is making his condition worse.
“I don’t sleep, I feel anxious most of the time, and this makes me even more anxious,” he says.
“I’m worried about the whole situation and the amount you get. I would have thought it would be more. I haven’t had to claim it before, so it’s just a bit of a shock. And I had no choice. If I had a choice I’d be at work.
“It’s not just me that’s suffering from my illness, it’s my family as well.”
While around half of workers are offered more generous levels of sick pay by their employers, a third are only entitled to the legal minimum.
What is statutory sick pay and how does it work?
Statutory sick pay is currently £109.40 a week, which works out at around a third of the minimum wage.
It is only paid from the fourth consecutive day of illness – during COVID this was temporarily changed so workers were entitled to support from day one, but that stopped last year.
Your employer does not have to pay if your average weekly earnings are less than £123 a week.
This means two million of the country’s lowest paid workers receive no sick pay at all – a situation which particularly affects those in jobs like cleaning, caring and security where zero-hours contracts are common and staff often work shifts for multiple employers. Self-employed people are not covered either.
In 2019, the government pledged to improve and expand statutory sick pay to cover all low-paid workers for the first time.
The idea was strongly supported in the resulting public consultation, with 75% of respondents in favour, including large and small employers. But during the pandemic that promise was abandoned.
Research on minimum income standards
Matt Padley, from Loughborough University’s centre for research in social policy, has calculated the impact of falling ill and relying on statutory sick pay in the light of his research on minimum income standards.
He and his team produce the annual minimum income standard calculation, which determines the weekly budget needed by households to maintain a socially acceptable standard of living in the UK.
For a single person living outside London that figure in 2022 was £489.20 a week.
Under statutory sick pay, a worker’s earnings are less than 25% of what they would need just to meet that minimum standard.
In the first week of illness, when payment only begins from the fourth day, that figure is 10%.
Within a month, a single adult previously on average earnings of £630 a week would face a shortfall of £1,230 – in three months, it’s £3,862.
“Without any other support from the state, all workers receiving statutory sick pay or no sick pay would fall well short of what they need for a minimum socially acceptable standard of living,” Mr Padley says.
That equates to more than 12 million people.
People are being forced onto benefits system
The campaign group Safe Sick Pay, a coalition of charities and trade unions, is calling for statutory sick pay to be increased in line with the minimum wage, for all employees to be covered, and for payments to begin on the first day of illness.
“Currently if these workers fall sick, they either have to go into work sick – making their condition worse and potentially infecting other people – or they stay at home and do the right thing, but then they’re left unable to pay the bills,” says campaign director Amanda Walters.
She argues low rates of statutory sick pay are forcing people onto the benefits system – as levels of support are significantly higher.
“If you fall sick and you only get the legal minimum sick pay then very quickly you’re going to fall out of the workforce, going onto benefits and to universal credit. And the longer you’re on universal credit, the harder it is to get back into the workforce.
“That is why we want to see a link between those that are sick and their employer not pushing them onto universal credit.
“A lot of these people want to remain in work. They don’t want to go onto universal credit. And at the moment, the current system is costing the taxpayer £55bn.”
But statutory sick pay was not mentioned, and some senior Tories, including former cabinet minister Sir Robert Buckland, argue sick pay reform has to be part of the strategy.
Image: Sir Robert Buckland is calling for sick pay reform
“Now’s the time for action,” he says.
“We’re talking about hundreds of thousands of people who, through no fault of their own, might get ill and who end up staying off work for longer because of the disincentives that are caused at the moment by the lack of reach of statutory sick pay.
“We need a range of measures to combat economic inactivity and lack of productivity. And it seems to me that a reform to stop sick pay is overdue.
‘A win-win for employers’
“It’s not just a compassionate move, it’s a common-sense move. It’s a pro-business move. It’s a productivity enhancing move.
“It’s a win-win for employers, because at the moment there’s a disincentive to even announce any illness at all, and that can lead to further problems down the line. And very often longer-term absence is disastrous for small employers who really get hit hard by that.”
A Department for Work and Pensions spokesperson said the government has a “strong track record” of getting people off benefits and back into work, and that the number of people who are economically inactive is going down.
“We are implementing a range of initiatives supporting disabled people and people with health conditions not just to start, but to stay and succeed in work,” they added.
The bosses of four of Britain’s biggest banks are secretly urging the chancellor to ditch the most significant regulatory change imposed after the 2008 financial crisis, warning her its continued imposition is inhibiting UK economic growth.
Sky News has obtained an explosive letter sent this week by the chief executives of HSBC Holdings, Lloyds Banking Group, NatWest Group and Santander UK in which they argue that bank ring-fencing “is not only a drag on banks’ ability to support business and the economy, but is now redundant”.
The CEOs’ letter represents an unprecedented intervention by most of the UK’s major lenders to abolish a reform which cost them billions of pounds to implement and which was designed to make the banking system safer by separating groups’ high street retail operations from their riskier wholesale and investment banking activities.
Their request to Rachel Reeves, the chancellor, to abandon ring-fencing 15 years after it was conceived will be seen as a direct challenge to the government to take drastic action to support the economy during a period when it is forcing economic regulators to scrap red tape.
It will, however, ignite controversy among those who believe that ditching the UK’s most radical post-crisis reform risks exacerbating the consequences of any future banking industry meltdown.
In their letter to the chancellor, the quartet of bank chiefs told Ms Reeves that: “With global economic headwinds, it is crucial that, in support of its Industrial Strategy, the government’s Financial Services Growth and Competitiveness Strategy removes unnecessary constraints on the ability of UK banks to support businesses across the economy and sends the clearest possible signal to investors in the UK of your commitment to reform.
“While we welcomed the recent technical adjustments to the ring-fencing regime, we believe it is now imperative to go further.
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“Removing the ring-fencing regime is, we believe, among the most significant steps the government could take to ensure the prudential framework maximises the banking sector’s ability to support UK businesses and promote economic growth.”
Work on the letter is said to have been led by HSBC, whose new chief executive, Georges Elhedery, is among the signatories.
His counterparts at Lloyds, Charlie Nunn; NatWest’s Paul Thwaite; and Mike Regnier, who runs Santander UK, also signed it.
While Mr Thwaite in particular has been public in questioning the continued need for ring-fencing, the letter – sent on Tuesday – is the first time that such a collective argument has been put so forcefully.
The only notable absentee from the signatories is CS Venkatakrishnan, the Barclays chief executive, although he has publicly said in the past that ring-fencing is not a major financial headache for his bank.
Other industry executives have expressed scepticism about that stance given that ring-fencing’s origination was largely viewed as being an attempt to solve the conundrum posed by Barclays’ vast investment banking operations.
The introduction of ring-fencing forced UK-based lenders with a deposit base of at least £25bn to segregate their retail and investment banking arms, supposedly making them easier to manage in the event that one part of the business faced insolvency.
Banks spent billions of pounds designing and setting up their ring-fenced entities, with separate boards of directors appointed to each division.
More recently, the Treasury has moved to increase the deposit threshold from £25bn to £35bn, amid pressure from a number of faster-growing banks.
Sam Woods, the current chief executive of the main banking regulator, the Prudential Regulation Authority, was involved in formulating proposals published by the Sir John Vickers-led Independent Commission on Banking in 2011.
Legislation to establish ring-fencing was passed in the Financial Services Reform (Banking) Act 2013, and the regime came into effect in 2019.
In addition to ring-fencing, banks were forced to substantially increase the amount and quality of capital they held as a risk buffer, while they were also instructed to create so-called ‘living wills’ in the event that they ran into financial trouble.
The chancellor has repeatedly spoken of the need to regulate for growth rather than risk – a phrase the four banks hope will now persuade her to abandon ring-fencing.
Britain is the only major economy to have adopted such an approach to regulating its banking industry – a fact which the four bank chiefs say is now undermining UK competitiveness.
“Ring-fencing imposes significant and often overlooked costs on businesses, including SMEs, by exposing them to banking constraints not experienced by their international competitors, making it harder for them to scale and compete,” the letter said.
“Lending decisions and pricing are distorted as the considerable liquidity trapped inside the ring-fence can only be used for limited purposes.
“Corporate customers whose financial needs become more complex as they grow larger, more sophisticated, or engage in international trade, are adversely affected given the limits on services ring-fenced banks can provide.
“Removing ring-fencing would eliminate these cliff-edge effects and allow firms to obtain the full suite of products and services from a single bank, reducing administrative costs”.
In recent months, doubts have resurfaced about the commitment of Spanish banking giant Santander to its UK operations amid complaints about the costs of regulation and supervision.
The UK’s fifth-largest high street lender held tentative conversations about a sale to either Barclays or NatWest, although they did not progress to a formal stage.
HSBC, meanwhile, is particularly restless about the impact of ring-fencing on its business, given its sprawling international footprint.
“There has been a material decline in UK wholesale banking since ring-fencing was introduced, to the detriment of British businesses and the perception of the UK as an internationally orientated economy with a global financial centre,” the letter said.
“The regime causes capital inefficiencies and traps liquidity, preventing it from being deployed efficiently across Group entities.”
The four bosses called on Ms Reeves to use this summer’s Mansion House dinner – the City’s annual set-piece event – to deliver “a clear statement of intent…to abolish ring-fencing during this Parliament”.
Doing so, they argued, would “demonstrate the government’s determination to do what it takes to promote growth and send the strongest possible signal to investors of your commitment to the City and to strengthen the UK’s position as a leading international financial centre”.
The Post Office will next week unveil a £1.75bn deal with dozens of banks which will allow their customers to continue using Britain’s biggest retail network.
Sky News has learnt the next Post Office banking framework will be launched next Wednesday, with an agreement that will deliver an additional £500m to the government-owned company.
Banking industry sources said on Friday the deal would be worth roughly £350m annually to the Post Office – an uplift from the existing £250m-a-year deal, which expires at the end of the year.
The sources added that in return for the additional payments, the Post Office would make a range of commitments to improving the service it provides to banks’ customers who use its branches.
Banks which participate in the arrangements include Barclays, HSBC, Lloyds Banking Group, NatWest Group and Santander UK.
Under the Banking Framework Agreement, the 30 banks and mutuals’ customers can access the Post Office’s 11,500 branches for a range of services, including depositing and withdrawing cash.
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The service is particularly valuable to those who still rely on physical cash after a decade in which well over 6,000 bank branches have been closed across Britain.
In 2023, more than £10bn worth of cash was withdrawn over the counter and £29bn in cash was deposited over the counter, the Post Office said last year.
A new, longer-term deal with the banks comes at a critical time for the Post Office, which is trying to secure government funding to bolster the pay of thousands of sub-postmasters.
Reliant on an annual government subsidy, the reputation of the network’s previous management team was left in tatters by the Horizon IT scandal and the wrongful conviction of hundreds of sub-postmasters.
A Post Office spokesperson declined to comment ahead of next week’s announcement.
As Chancellor Rachel Reeves meets her counterpart, US Treasury secretary Scott Bessent to discuss an “economic agreement” between the two countries, the latest trade figures confirm three realities that ought to shape negotiations.
The first is that the US remains a vital customer for UK businesses, the largest single-nation export market for British goods and the third-largest import partner, critical to the UK automotive industry, already landed with a 25% tariff, and pharmaceuticals, which might yet be.
In 2024 the US was the UK’s largest export market for cars, worth £9bn to companies including Jaguar Land Rover, Bentley and Aston Martin, and accounting for more than 27% of UK automotive exports.
Little wonder the domestic industry fears a heavy and immediate impact on sales and jobs should tariffs remain.
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American car exports to the UK by contrast are worth just £1bn, which may explain why the chancellor may be willing to lower the current tariff of 10% to 2.5%.
For UK medicines and pharmaceutical producers meanwhile, the US was a more than £6bn market in 2024. Currently exempt from tariffs, while Mr Trump and his advisors think about how to treat an industry he has long-criticised for high prices, it remains vulnerable.
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The second point is that the US is even more important for the services industry. British exports of consultancy, PR, financial and other professional services to America were worth £131bn last year.
That’s more than double the total value of the goods traded in the same direction, but mercifully services are much harder to hammer with the blunt tool of tariffs, though not immune from regulation and other “non-tariff barriers”.
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The third point is that, had Donald Trump stuck to his initial rationale for tariffs, UK exporters should not be facing a penny of extra cost for doing business with the US.
The president says he slapped blanket tariffs on every nation bar Russia to “rebalance” the US economy and reverse goods trade ‘deficits’ – in which the US imports more than it exports to a given country.
That heavily contested argument might apply to Mexico, Canada, China and many other manufacturing nations, but it does not meaningfully apply to Britain.
Figures from the Office for National Statistics show the US ran a small goods trade deficit with the UK in 2024 of £2.2bn, importing £59.3bn of goods against exports of £57.1bn.
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Add in services trade, in which the UK exports more than double what it imports from the US, and the UK’s surplus – and thus the US ‘deficit’ – swells to nearly £78bn.
That might be a problem were it not for the US’ own accounts of the goods and services trade with Britain, which it says actually show a $15bn (£11.8bn) surplus with the UK.
You might think that they cannot both be right, but the ONS disagrees. The disparity is caused by the way the US Bureau of Economic Analysis accounts for services, as well as a range of statistical assumptions.
“The presence of trade asymmetries does not indicate that either country is inaccurate in their estimation,” the ONS said.
That might be encouraging had Mr Trump not ignored his own arguments and landed the UK, like everyone else in the world, with a blanket 10% tariff on all goods.
Trade agreements are notoriously complex, protracted affairs, which helps explain why after nine years of trying the UK still has not got one with the US, and the Brexit deal it did with the EU against a self-imposed deadline has been proved highly disadvantageous.