Coronavirus policy round-up – 27th March 2020

This week we entered a world of lockdown with non-essential businesses asked to close and most of us told to stay at home. Just a few weeks ago, the scale of the shutdown of our economy would have been unthinkable. And yet, here we are.

Our Fraser of Allander Commentary and Podcast earlier this week had a deeper look at what we know so far about the economic impact and also featured contributions from John Macintosh of Deloitte on the impact on business. In this blog we give a summary of new announcements from government that apply to us here in Scotland.

The latest announcement from the UK Chancellor came yesterday, and focused on the self-employed. The time taken to derive the scheme serves to highlight the complexity of operationalising a scheme like this and a desire to try and get money to those who they think will actually need it. Our blog published earlier has a run through of the detail and the possible numbers affected, and the basic elements are similar to the Coronavirus Job Retention Scheme with 80% of profit available up to a cap of £2,500 a month. There are exclusions – businesses with profit over £50,000, people who pay themselves via dividends and those who have set up businesses in the 19/20 financial year (and therefore haven’t yet filed a tax return). Some of these are for operational reasons, but will be galling for those affected. Payments won’t be made until June which will be concerning for many, and probably too late for some.

More details on the Coronavirus Job Retention Scheme were made available this week. It’s available to all UK employers had a PAYE scheme in operation by the 28th February 2020. It will apply to employees who have been asked to stop working but are being kept on the payroll. HMRC will pay a grant to employers with 80% of usual wage costs plus associated Employer National Insurance Contributions and the minimum automatic enrolment pensioner contributions on that wage. Wage costs are determined as the higher of the amount earned in the same month last year or the average of monthly earnings from the last year or, the average of your monthly earnings since you started work if you have been employed for less than a year. Employees on agency contracts and on flexible/zero-hour contracts will be eligible. Buried in an FAQ there is also advice for employers that they can consider using the Coronavirus Job Retention Scheme for parents who need to take time off for childcare.

The Scottish Government has also released more details of the grants they are making available for businesses. Applications (via local authorities) are now open. Reliefs that were previously announced for non-domestic properties will start from 1 April 2020. Scottish airports are included in the 100% rates relief as are organisations providing handling services (e.g. baggage handlers) for flights at Scottish airports. The operator Loganair, which provides flights to the Highlands and Islands, will also receive the 100% relief.

With so many announcements, and plenty of knee jerk reactions from politicians, businesses and the general public, we will need to wait and see how successful these schemes will be in propping up the economy. There are already strong indications that unemployment is on a steep upwards trajectory given that half a million new people applied for Universal Credit in the nine days up to the 25th March, plus claims of tens of thousands of people waiting for hours to register. Some of this may ease now that the new Self Employment Income Support Scheme has been announced, but with months before any payments are due, the social security system may be the only option in the short-term.

Despite considerable fears about the economy and household and public finances, the death rate from the virus is increasing and arresting this must continue be the focus of our action. The steps taken to shutdown most of the economy are a crucial part of the response.

The collective action from policymakers, businesses and the general public has been impressive. There are of course numerous questions still to be resolved, particularly around delivery of the various support schemes and wrinkles in eligibility that need to be worked through. The next few weeks and months will no doubt be challenging but the unprecedented investment that we have seen so far in the health of our population and the economy is hugely welcome.

Authors

Emma is Knowledge Exchange Fellow at the Fraser of Allander Institute

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