The Government’s economic support schemes have been announced in four tranches. First, the Government announced £12 billion in emergency support at the Budget on 11 March, in particular for public services. It then announced a business support package on Tuesday 17 March, followed by a jobs and income package on Friday 20 March, the centrepiece of which was the Coronavirus Job Retention Scheme. It supplemented this scheme with a Self-Employment Income Support Scheme on Thursday 26 March.
There is significant delay in the implementation of some of these schemes. The Job Retention Scheme is expected to be operational by April. The Self-Employment Income Support Scheme will be paid from the beginning of June. There is also ambiguity in how some of these schemes will operate, not helped by the fact that some of the schemes (such as the Job Retention Scheme) are not on a statutory footing, in the Coronavirus Act or elsewhere.
There is significant disquiet and distress about the operation of some measures announced at the Budget, the administration of the business support package (including the Business Interruption Loan Scheme), and the design and eligibility for the Job Retention Scheme and Self-Employment Income Support Scheme.
The Labour Party has collated accounts that have been received of: difficulties experienced by people in relation to schemes already in force, concerns from people not covered by any schemes, and problems identified with the schemes that have not yet been fully implemented. Individual MPs have collected these accounts, which have been reviewed for policy implications. Common themes relevant to the economic policy response to Coronavirus are described below, with recommendations for changes in bullet points. These should be read alongside recommendations that have been made in other recent Labour reports – especially Wages, Welfare, and Wellbeing and Protecting People in and Out of Work.1 We do not claim that this is an exhaustive list of all of the flaws and holes in the Government’s economic support schemes. But what is clear is that the schemes already in force are not always operating as intended, creating significant uncertainty and barriers to support; and a range of gaps in protection have been identified with schemes not yet fully operational.
The Government’s Emergency Support Announcements at the Budget
Concerns have been raised about local government capacity to deliver the £500 million Hardship Fund announced in the Budget. Local authorities, hollowed out by ten years of cuts, have been asked to take on additional responsibilities. Responsibilities raised with MPs include social care, funeral arrangements, and overcrowding in housing and its relationship to Coronavirus.
Local authorities also appear to have been sent mixed messages about the funding available to them. One MP reported a local authority being told that it could ‘spend now and be reimbursed later’. The limits on that statement were not spelled out.
The Government must:
- Announce whether further funding will be forthcoming for local authorities to discharge responsibilities from the Budget and other COVID-19 measures; • Clarify what, if any, limits apply to local authorities’ spending.
The Coronavirus Job Retention Scheme
Constituents have raised concerns about Statutory Sick Pay. Some workers have been told they should self-isolate and will be paid Statutory Sick Pay. That has raised concern about the tension between the low level of Statutory Sick Pay (£94.25 a week) and the 80% of wages promised by the Government under the Job Retention Scheme. This difference appears to invite employers to use Statutory Sick Pay over furloughing. It is another reason why the Government must lift levels of Statutory Sick Pay.
The Labour Party has raised the concern that the ‘furloughing’ system has too much of an ‘all-or-nothing’ character: workers must be placed entirely on a leave of absence to have their wages underwritten, and workers working reduced hours cannot be ‘furloughed’. The Government must adjust the scheme to allow it to be more flexible.
Seasonal Workers: Case Study (Anonymised, Email to MP)
… My partner and I are campsite wardens for a small privately owned campsite … This would have been our 2nd season on this site and 10 years experience in this industry with other campsites. We normally work on seasonal contracts from 1 April to 30 September each year. We were offered to be re-employed this season at the end of last season in September 2019. Over the past couple of months details have been finalised by email as to our start date. Although our work contracts do not start until April, the above written communications constitute a legal contract of employment under employment law. Campsites were one of the first businesses asked to close by Government after pubs and clubs. Our employer contacted us on Monday 23 March to say that we could not start as agreed on 1 April. Our employer has also said that he would need us to return to work when the site re-opens, so he is in all intents and purposes “furloughing” us until a later date, yet unknown.
… Let me try and explain why it will hit employees in our industry the hardest. 99% of campsite warden jobs are offered to couples / husband & wife teams so this will affect both adults’ earnings. Whilst working on site, we are allowed to stay in our caravans/motorhomes free of charge. This allows us to save the majority of our wages during the summer and then live off those savings in the winter without the need to claim for benefits. I.e. 6 months earnings can just last us for a full year, even though almost all campsite wardens will be working for the minimum living wage. We are now at the point where those savings are running out as we were all supposed to return to work this upcoming week. For each month we are unable to work this season means 2 months we are unable to live now or in the future. … if the scheme is amended, I would urge you to plead the situation of the large group of employees I have described above who feel they have been thrown to the wolves. I have heard that other MPs are stating that the date of 28 February was chosen to avoid abuse of the scheme. As already having existing legal contracts of employment in place by favour of jobs having been offered and accepted under agreed terms – we should also be considered as both eligible and valuable furloughed employees.
As demonstrated by the case study on the previous page, MPs have been approached by workers on fixed-term contracts or in seasonal work, whose contracts or seasonal work has been cancelled but who will not benefit from the Self-Employment Income Support Scheme. The Government should state whether these workers will receive any support beyond being referred to Universal Credit.
The other point raised by the case study on the previous page, and by numerous other constituents, is that the Coronavirus Job Retention Scheme is not available to those who were employed between 28 February and 20 March. This covers a significant number of new starters. People making TUPE arrangements applying after 28 February may also be adversely affected.
TUPE: Case Study [By Email]
On 4th March we also commenced operations at [an airpot], employing 142 people through a TUPE process and around another 50 directly. We are now in position where our customer airline at Gatwick will not be operating for the foreseeable future and we were planning to put the majority of these employees into the Government’s Job Retention Scheme from 1st April. When more details were released on Friday, it now seems this will be a problem as almost none of these employees were on our payroll on 28th Feb 2020 and the legal advice I have received so far is that even for the TUPE staff it may well not be possible to claim for them due to this reason. This would potentially leave us with a very difficult decision to make and may result in the 142 TUPE employees being disadvantaged simply due to the fact they have been TUPE transferred at this time.
I understand that no scheme can consider every possible eventuality and would like to think that there could/will be some concession in terms of this type of TUPE situation, but we need to make some decisions very quickly. Would you be able to assist with getting any further clarification regarding our specific situation or put me in contact with someone who may be able to assist? Any help or support you could provide would be greatly appreciated.
The Government should:
- Increase levels of Statutory Sick Pay; • Allow part-furloughed workers to receive 80% of their wages; • Clarify what, if any support, will be offered to workers on fixed-term contracts or in seasonal work whose work will no longer be available; • Remove the 28 February cut-off date for eligibility for the Job Retention Scheme and allow workers all employed up to 20 March to be supported.
The Government’s Business Support Package, Including the Coronavirus Business Interruption Loan Scheme
A range of concerns have been raised about the limits on business support. Some have asked why the the Retail and Hospitality Grant Scheme is only available to businesses with premises. Others have wondered whether there is good reason why businesses with rateable values of over £51,000 are not eligible for the Retail and Hospitality Grant Scheme.
It has been widely reported in the media, and reflected in constituent concerns, that banks have acted inconsistently in asking for personal guarantees for loans under the Business Loan Interruption Scheme.
Rates and Grants: Case Study [Anonymised, By Email]
… I run a small film business … we have four colleagues (3 employed and one self employed), and we are profitable and pay Corporation Tax. As you may know, the film industry is currently fully shut down. … like many businesses we rent our premises inclusive of rates, and therefore we do not have a rates account with our local authority. We are very concerned therefore that we will not be eligible for the £10K grants available to those businesses in receipt of Small Business Rate Relief. From what I can tell we are exactly the size of business that this relief is intended for – and have fixed ongoing costs of around £5K a month even taking into account the Coronavirus Job Retention Scheme – and yet we will fall through the cracks as we do not directly pay Business Rates, because of the nature of our rented premises.
The Government should:
- Explain why grant support in the retail and hospitality sector is limited to those with premises and consider further relief to those without premises; • Urgently clarify that personal guarantees should not be required as part of access to the Business Loan Interruption Scheme.
The Self-Employment Income Support Scheme
Constituents have expressed concern about the cap on trading profits of £50,000; noted that limited or no support is available across all schemes to dentists and pharmacists; and stated that the self-employment scheme prevents directors of their own companies, without a PAYE scheme, from being supported.
Directors and the Self-Employed: Case Study [Anonymised, By Email]
I was a sole trader for one year when going freelance, but I needed to setup as a LTD company for protection and it was also the case that many agencies and clients would not work with sole traders. You had to be setup as LTD. Following the new ‘self employed’ package the .gov website states: “Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.” The job retention scheme (if available – there are still question marks as to whether a sole director could access this) would mean I receive approximately £575 a month if I furlough myself based on 80% of my salary – and would also means I can’t trade and get my precious businesses slowly running again. Also, I am ineligible for Universal Credit as I have £16k set aside for my next tax bill. This is not my personal money, but renders me unable to access this support open to others. There are thousands of us setup like this as sole directors of our small Limited Companies. Our self employed Sole Trader colleagues can receive up to £2,500 where as we who are setup as a Limited Company will receive a maximum total of £951 (including UC), and me personally only £576 under the Job Retention Scheme, (if eligible). We cannot survive on this amount of money with mortgages/rent and bills to pay. Loans on offer are around 15% interest, with huge fees and extremely long, complex applications including future forecasts required. How anyone can forecast what is going to happen is impossible. I have employed myself for the last 2 years and have made regular VAT & tax payments (including corporation and dividend tax) during that time and feel we have been totally left out of the current arrangements. Prior to that I worked full time in a PAYE set up for 15 years, paying income tax and NI annually. Although Mr Sunak claims 95% of us that are self employed will be covered, there are thousands of us that are being fatally penalised simply because we are set up in this way following the advice of accountants over the years and pressure from clients. There are far more than 5% of us that have been overlooked. We are simply Sole Traders that were advised or needed to go LTD to continue in our industry or provide our services to certain clients.”
Other points raised include the fact that the arts sector will be particularly hard hit, including after the crisis when there may be a slow return to business (because of likely public caution and the need for rehearsal time, amongst other things).
A further concern, expressed vocally and repeatedly across different constituencies, is that the Self-Employment Income Support Scheme excludes individuals that do not have a tax return for 2018/19.
Foster carers have indicated that they may not receive sufficient support because they tend to declare very little or no profits; and others outside of foster care are in a similar position (see case study below).
Those Self-Employed Without Tax Returns for 2018/19: Case Study [By Email]
I write to ask for your support in the urgent and serious concerns about the applicability of the Self-Employment Income Support Scheme announced 26th March 2020. While it came as a relief to many, it is woefully insufficient, as it does not offer financial aid to those without 2018/19 self-employed tax returns that accurately reflect current earnings. In the announcement broadcast on BBC1, Robert Peston raised concerns on behalf of those who started selfemployment after 5th April 2019. The response from the Chancellor was “There is nothing we can do for people with no tax return… We have to use the database of people we know about”. For the reasons set out below I feel that the reliance on 2018/19 tax returns is an unnecessary barrier to equitable application of the Scheme. The scheme is most unjust for the newly selfemployed:
- those who haven’t filed a tax return for 2018/19 • those who were previously employed and became self-employed in the 2018/19 tax year, whose employment earnings were higher than their self-employed earnings. • those who filed a tax return for 2018/19 that contained negligible earnings owing to their work commencing shortly before the end of the tax year
Every member of these groups will be excluded from receiving any or any meaningful benefit from the Scheme, despite their self-employed earnings being the majority, or sole, source of their income.
The newly self-employed are among the most financially vulnerable to the current situation, they: earn the least; have the least savings; are the most reliant on day to day trading/work as a source of income; have the least developed business, business practices, professional networks and client bases.
This comes at a time of year when many self-employed, after a quiet winter, are gearing up for a busy summer of trading, which accounts for most of their income. It is also a well-recognized issue that female, BAME and those from disadvantaged socio-economic backgrounds are disproportionately overrepresented in the lower rungs of many industries. This raises serious concerns about the discriminatory effect of the Scheme with regards to the Equality Act 2010.
Furthermore, in the absence of the safety net provided to PAYE employees, such as statutory maternity pay, sick pay and a company pension, it is vital the self-employed maintain savings. These savings are used against the Self-Employed when applying for Universal Credit; thus they lose twice over. The newly self-employed should be allowed to rely on their 2019/20 tax returns. The end of the 2019/20 tax year is mere days away, following which 2019/20 tax returns can be filed. The first payments from this scheme are not schedule to be paid until June 2020. This would prevent much needed financial aid from being arbitrarily denied to newly self-employed people. There is no principled reason for the disproportionate and inequitable treatment of the newly self-employed.
Self-Employed People with Low Trading Profits: Case Study [By Email]
Notably a group not featured in any discussions are those who in the barely managing category who have been living off interest from modest bank/building society savings and share dividends and may be some zero hour self employed work. These people will not have income not exceeding the personal allowance tax thresholds- ie no more than £17,500 per year at very best.
With the stock market crash and reduction on saving rates of interest-these people have lost their expected income but will not qualify for any of the benefits.
They have stark choice of cashing in savings/stocks at a loss to survive. They manage their lives on at best £1,458 per month covering all bills including Council tax. Like many on a low incomes they survive by juggling carefully not seeking any State support, not doing anything they cannot afford and above all relying on low cost supermarket foods.
For this group, tax returns will not show any taxable income in past 3 years. They will be above the threshold of eligibility for receiving universal credit on account of savings providing income and will not be eligible for SSP having in many cases not been in receipt of any income requiring NI payments or reaching that threshold.
Those that have secured sufficient NI credits to qualify eventually for State pension at 68 + will have been told they have no need to pay NI on voluntary basis. Mostly such individuals have been trying to survive through to reaching a position over 55 of may be being able to draw down on small private pension funds.
Could the Government consider this group and maybe provide scope to cash in small private pensions without being subject to further loss of 20% tax. Presently only first 25% of pension pots can be received tax free.
The future for this group of individuals predominantly 55- 68 is bleak. They have not received State aid and have managed their lives in modest way seeking to avoid any dependence but how are these people going to cope through to 68 or beyond if then trying to live on basic state pension.
Pensioners who have taken themselves off to live abroad for at least part of the year have often done so because this has meant cheaper heating bills, food and housing but they are suffering now from drop in value of the £. Does this Government care about those who have tried not to be burden on the State ever!
The Government should:
- Clarify what support is available for dentists and pharmacists across all schemes; • Make clear whether any targeted support will be available for those in the arts; • Indicate whether any relief can be provided for those without a tax return in 2018-19 (which may, for example, include those who have been off work looking after children); • Set out what support is available to foster carers.
Other Omissions from Announcements So Far
There have also been calls for further relief on utility bills, support for undocumented migrants and non-UK nationals (blocked from accessing services in many cases), an end to the two-child limit and Benefit Cap, secure funding for Sure Start centres, the creation of business advice centres, improvements in the quality of food deliveries, use of local supply chains as part of food deliveries, publication of agreements between Governments and manufacturers manufacturing essential equipment (such as ventilators), and further support for civil society.
In relation to banking and credit, repeated inquiries have been made for more coordinated action on overdraft charges and adjustments to be made by credit rating agencies.
Overdraft Charges: Case Study [By Email]
As you see from my previous email, I think it’s shocking that Barclays Bank commenced charging 35% interest on overdrafts at a time when they can borrow money at an historic low and people are desperate. There seems to be no debate or comment in the media, from MPs or any other quarter. I think this measure is unreasonable at this time, or any time, and will bring people to ruin and despair.
Credit Ratings Agencies: Case Study [By Email]
Lots of things are being done to try help people during this crisis but I note I haven’t heard anything about credit rating agencies.
For example if you miss a credit card payment or sign up to Universal Credit it impacts your credit rating even though they might be temporary and then if you do get credit the banks add more interest to rate.
The Government should be requiring credit rating agencies to freeze all downgrading of anyone’s ratings for the next 3 months at least.
It is wrong that people’s financial future is risked for a short term issue – what if someone wants a mortgage in November but was in Universal Credit or missed a payment in April through no fault of their own.
Credit rating agencies need to be brought into line too. I just paid my credit card this morning and I’m lucky I can but I got an e-mail to let me know my company is offering payment holidays etc but then pointed out if you take one or miss a payment it impacts your credit rating! So when you’re back on your feet the banks will try to rip people off again.
The Government should:
Take action to provide relief on utility bills;
End ‘No Recourse to Public Funds;
Suspend or end the two-child limit and the Benefit Cap for the duration of this crisis;
Ensure coordinated action is taken on bank overdraft charges.
There are reports that the Chancellor will come forward shortly with a revamp of the Business Interruption Loan Scheme. What the foregoing survey makes clear is that it will not be sufficient if the Chancellor only tweaks the operaion of that Scheme. There are significant holes, ambiguities, and problems across the Budget package, the business support scheme, the Job Retention Scheme, and the Self-Employment Income Support Scheme. Only major and urgent changes of all these schemes will ensure workers do not miss out – and guarantee that we have a comprehensive and effective economic response to the threat of Coronavirus.