The government announced unprecedented economic measures to tackle coronavirus. But there are still questions to be answered
The Covid-19 pandemic is an unprecedented challenge for our economy, jobs and incomes. It’s produced an unprecedented response from the government.
On Friday last week, the government unveiled its latest package to shore up households, introducing a Coronavirus Jobs Retention Scheme and changes to the benefits system. These measures will provide welcome support for millions of families who’ll be worried about making ends meet during this crisis.
However, the employment landscape is complex and the government will need to release more detail in the coming days. How will the jobs retention scheme support all types of workers, for example, and what support will be available for the self-employed?
We consider the measures announced so far and outline the questions which, if left unanswered, could leave many people unprotected — and at risk of falling through the gaps.
What action has the government taken so far?
On Friday, the Chancellor, Rishi Sunak, introduced 4 key measures to support workers and households during the coronavirus pandemic:
- A Coronavirus Jobs Retention Scheme, which will guarantee 80% of employees’ wages if they are temporarily not working as a result of the coronavirus crisis
- Increasing the standard payment for Universal Credit and tax credits by £20 a week
- Increasing the Local Housing Allowance, relinking to the market cost of rent in people’s local area (at the 30th percentile — so that people would be able to afford the cheapest 30% of rents in an area)
- Dropping the Minimum Income Floor in Universal Credit for all self-employed people, which can reduce many self-employed people’s level of support
This is an extraordinary crisis, meriting this extraordinary response. Taken together, this package should give firms and workers in many sectors hit hardest by this crisis the financial security they need to weather the storm. But there are still questions to be answered.
Who’ll be protected by the Coronavirus Job Retention Scheme?
The government will be publishing more information on this scheme so we don’t yet have all the details. However, the Coronavirus Job Retention Scheme should protect any employees who ‘remain on payroll but are temporarily not working during the coronavirus outbreak’. As long as firms use this scheme, this should cover workers at any company who are experiencing tough times through the crisis.
But will it include people who are off sick or self-isolating due to coronavirus?
When it publishes the details of the scheme, the government should make clear it does — particularly when it has had to ask 1.5 million people to self-isolate for the next 12 weeks, many of whom will not be able to work remotely during that period.
If these groups are not included in the scheme, the government will still need to dramatically increase Statutory Sick Pay and extend the lower earnings limit to everyone who’s not currently covered.
We expect most employers will want to use this scheme to protect all their employees, so their business is ready to go back to normal when the crisis stops. However, there’s always the potential for abuse — for example, rogue employers could let employees go selectively while offering the wage subsidy to other employees.
The government should ensure the scheme is designed in a way that ensures employers don’t act this way. This scheme is an enormous collective underwriting of companies’ wage bills by the taxpayer. The public are entitled to expect that firms will apply for the scheme in a way that treats their employees fairly.
How will insecure workers be protected?
Clarity is also needed for 2 other specific groups of workers: people on zero hours contracts and agency workers.
It looks like whether people on zero hours contracts are entitled to the wage subsidy will depend on whether they’re paid through PAYE — if they are, they should qualify. However, given the fluctuations in how many hours they work week by week, how will their wages be calculated under the scheme?
In many circumstances, it may be sensible to average their number of hours over a certain period to determine eligibility (for example, an average of the previous 12 weeks, as for calculating redundancy pay for shift work).
Agency workers are trickier still. If they are on ‘pay between assignment’ contracts, it’s potentially more straightforward — these workers are employees of the agency and therefore could be eligible for the wage subsidy that way.
But will agency workers in temporary jobs be eligible for the scheme? If they are, what’s the incentive for agencies to keep workers — who, by the nature of the work, are often filling a temporary need — on the books and claim a subsidy through the scheme? What support will be available for these workers if the scheme doesn’t protect them?
Changes to benefits and protecting the self employed
Those whose incomes are not supported by the jobs retention scheme will potentially be eligible for financial support through the benefits system.
The Chancellor announced significant increases to certain benefit levels on Friday, including Universal Credit and Tax Credits. However, a number of legacy benefits weren’t included in his speech, such as Income Support. The government should clarify whether all legacy benefits will be uprated by the same amount — not least because, at a time of high pressure on Jobcentres, people should not need to move from old benefits to the new system at this time to access additional financial support.
These steps to help self-employed people in the benefit system are welcome — they will particularly benefit from suspending the Minimum Income Floor in Universal Credit and increases to benefit rates. However, they likely won’t go far enough to give all self-employed people enough to live on and to protect them from the significant income shock many will face in the coming months.
The government will need to go further in the coming days for those who currently may fall through the gaps.
