There is no doubt that support for the UK workforce during this Coronavirus outbreak announced so far has been completely unprecedented. Despite this, we know it does not provide support to each and every person affected. This blog summarises what we know about some of the gaps and looks at options available if government were to extend support further.
There will be a number of people who were working as employees that will not have been scooped up in the Coronavirus Job Retention Scheme. There are a number of reasons why this may be the case. Their former employer may have ceased trading or may have taken the decision not to apply for the scheme, perhaps due to the issue of covering salaries up until the point that HMRC provide rebates. Whilst the reasons may be different, and some may blame unscrupulous employers in some cases, those on the receiving end are in the same boat and left without a source of earnings.
There are also contractors who operate within the PAYE system via umbrella companies whose contract has ended and no new work is forthcoming. This group is smaller than may have been the case had the UK Government not announced a delay of the bringing in of IR35 rules for the private sector until April 2021, but those working for public sector clients will have been adhering since 2017, and therefore would not have completed self-assessment.
For the self-employed, the scheme announced by the Chancellor will offer support to those with relatively simply tax affairs, who have trading profits under £50,000, and who have documented evidence of self-employed earnings in the previous financial year. Although these restrictions may be due to operational necessity, it clearly leaves many people excluded – most obviously those who have set up as self-employed since April last year. For those who are set up as limited companies, payment via dividends is not included in the scheme primarily it seems because these can’t be distinguished from other dividends received from other shareholdings. We will not go into the rights and wrongs of the approach taken here. Clearly these are difficult schemes to get right, developed at speed, and it’s likely that any possible scheme that has protection against fraud will have drawbacks and those that lose out.
So, what is available for those who find themselves without their previous job or source of earnings?
The first is to find alternative employment, which is of course easier said than done during an economic shutdown. There are some new employment opportunities that have arisen due to Coronavirus which some people may be able to take up, albeit possibly on much lower pay than previously earnt. For example, food retail and parts of the agricultural sector are looking for workers (the latter is braced for crisis in the coming months across Europe if it can’t secure a labour force, which could have serious ramifications for food supply) as is the NHS although this is only an option for returners to the health and social care professions.
Matching jobs to people can be a difficult and inefficient process, and there could be scope for the government (including devolved and local government) to play a role in gathering and publicising vacancies for particular sectors and localities, to make information easily available to recently unemployed workers who may not currently be in contact with Jobcentres.
Full reliance on the social security system remains the last resort, but here again there will be people who are ineligible due to their circumstances, such as holding savings or having a second earner in the family. Whilst some will contend that it’s right that those in these situations should not be entitled to benefits, this same condition is not applied to those who will receive government money via the employee or self-employed Coronavirus schemes. It is also likely that those on social security will receive far less than those new schemes where the maximum available is £2500 a month, which is roughly at the level of average earnings. Although amounts vary, and housing costs may also be paid (at least in part) the comparison under Universal Credit could be as low as £335 a month.
There are a number of options for the UK Government here. At a minimum, relaxing eligibility so that people can enter the social security system, at least temporarily, even if they are over the savings limit or if they have other family members earning, would seem appropriate given the lack of eligibility constraints in other schemes.
Additionally, the government could amend the system so that for those recently made unemployed, PAYE contributions over the year are used to provide the same support as seen in the job retention scheme. A similar process for the affected but recently self-employed could be operated, using evidence gathered for the 2019-20 tax year about to come to an end. This would be closer to the unemployment insurance scheme seen in places like Denmark (and indeed could be something worth considering keeping once this crisis has subsided). Administratively this could be quite burdensome, but a light touch approach to get money out the door, with checks performed when feasible and money recouped at a later date, is always an option.
A simpler option would be to increase the amount available for all those in the social security system who are unable to work. This could be operated as a simple boost to the standard allowance, adding to the increase announced a couple of weeks ago. This would give a boost to all who are struggling on a low income at this time – there is no doubt that costs will have increased for many as normal routines have been disrupted – not just new claimants.
DWP have relaxed conditionality and the risk of sanctions, and a higher payment perhaps moves us closer towards the aspirations of those who are calling for a Universal Basic Income. However, given the support already available for many employees and self-employed, we don’t need this to be universal – in fact we want people to remain attached to their employers and be able to restart established businesses when they are able to. It makes much more sense for government to focus on levelling the playing field, rather than destroying the existing playing field and building a new one.
Does the Scottish Government have a role here? Theoretically, they can top up existing benefits and do so even when claimants are sanctioned. This is indeed what they are doing with the Scottish Child Payment which (as far as we know) will start paying out to some children at the end of this year. But the process of setting up this payment has shown that the Scottish Social Security Agency does not have the data to move quickly – for this they rely on DWP, who clearly have a lot else to focus on at the moment. Other than increasing the amount available for hardship grants such as the Welfare Fund, or finding ways to get money to existing claimants of local benefits such as Free School Meals, the Scottish Government is currently limited in the financial support it can direct to people who need it.
Eyes will remain on the UK Chancellor to see whether more support is in store for those who have so far missed out.
Emma is Deputy Director and Senior Knowledge Exchange Fellow at the Fraser of Allander Institute