UK ‘must spend extra £22bn’ to help workers facing layoffs, urges thinktank
The government should commit a further £22bn to support up to 1 million workers facing layoffs and families that suffer big income shocks following the coronavirus outbreak, a thinktank has urged.
As pressure mounts on the government to restore business and consumer confidence, the Resolution Foundation said a new work subsidy modelled on maternity pay should be available for workers threatened with redundancy.
The new statutory retention pay would allow firms to put staff on leave without making them redundant, supporting a million workers via a flat-rate subsidy to employers worth £151 per week for an initial six months.
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The scheme would cost around £3.6bn, the thinktank said, while a more ambitious earnings-linked scheme, in which staff are paid at least two-thirds of their typical salary – above the minimum £151 per week threshold – would cost around £8bn.
The chancellor, Rishi Sunak, announced an expansion of statutory sick pay in the budget on 11 March and a relaxation of benefit rules designed to help vulnerable workers. He has not ruled out adopting a broader package of income support but has said the mechanisms used by other European countries do not exist in the UK.
A £350bn package announced on Tuesday offered businesses in the hard-hit retail, leisure and hospitality sectors a year-long holiday from paying business rates, with smaller firms also eligible for a cash grant of up to £25,000.
Sunak also announced cash grants of £10,000 for the UK’s 700,000 smallest companies and a three-month moratorium on mortgage payments for homeowners in difficulty due to the coronavirus.
With the scale of the coronavirus pandemic – and the public health response to it – having escalated since the budget last week, the foundation said the chancellor must “step up the scale of support for affected workers and rethink the approach to helping struggling firms”.
The thinktank’s report says around 5 million workers are vulnerable to being laid off unless the government goes further. Without giving a forecast for the likely rise in unemployment, the report estimates in its modelling of the potential costs that between 500,000 and 1 million workers could be laid off.
It says fewer than one in 10 of those in the bottom half of earners say they can work from home, and those in the most at-risk sectors and occupations also have less to fall back on given that they are around 25% more likely than average to live in families with no savings.
The report says a fresh approach is needed, including the extension of sick pay to 2 million low earners currently excluded and an increase in unemployment benefits and universal credit to £100 per week. It says a rise in unemployment is inevitable as some firms go bust and the self-employed lose work.
“To strengthen the safety net that many families will rely on in the months ahead, the government should increase the generosity of jobseeker’s allowance, employment support allowance and the standard rate of universal credit. From April these benefits will pay just £74 a week to a single adult – and just £59 to those under 25) – when losing their jobs,” the report says.
“This is the same as they were paying in the early 1990s, despite the economy growing by more than half since then. Increasing their value by around a third to £100 per week (for an adult aged 25 and over) would cost around £10bn a year. Going further to up-rate other means-tested working-age benefits by 10% would cost a further £3bn.”
The former prime minister and chancellor Gordon Brown urged Sunak to do “considerably more” by the weekend to protect people’s jobs.
Speaking on BBC Radio 4’s Today programme, he said: “He says he’ll do more but the package should be out now to avoid redundancies being forced upon companies over the next day or two.
“I think a lot of company directors will be looking at the moment to how many staff they are going to shed in the next few days, next few weeks. And I think we need to step in now with building the confidence that we can keep people in work or keep people on short term in work and have an arrangement with people where they take some holidays but at the same time they are going to have income protection.
“If families don’t have income protection, there’s lot of other consequences: people try to work if they are sick, people put themselves at risk.”
Torsten Bell, the chief executive of the Resolution Foundation, said: “The chancellor has said that he will do whatever it takes to support the country through the coronavirus-induced economic shock. That commitment now needs to be extended to the millions of workers and their families whose livelihoods and living standards are affected by the shutdown.
“In order to avoid mass redundancies in affected sectors, new statutory retention pay would allow firms to put workers on paid leave with the state paying them at least two thirds of their wages during the shutdown. This will ensure they can pick things up quickly when conditions improve.”
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