Economic impact of the coronavirus: Gaps in support
NIESR welcome the report from the House of Commons Treasury Committee and particularly the recognition given to the plight of new starters. The evidence presented in the report reflects our own assessment of the situation, published in a recent open letter by Claudine Bowyer-Crane and Adrian Pabst.
Claudine Bowyer-Crane, Associate Research Director for Employment and Social Policy, said:
“It is clear that extending the cut-off date for the Coronavirus Job Retention Scheme (CJRS) from 28th February to 19th March has not adequately addressed the lack of coverage for hundreds of thousands of people who continue to face devastating financial hardship.”
“The sticking point is the added requirement on the part of the HMRC that employees need to have real time information, i.e. they need to have received a payslip in order to qualify for furlough, in order to avoid fraudulent claims. The need for protection against fraud is understandable but the approach is inadequate. Employers have access to alternative forms of evidence which, if accepted by HMRC, would allow them to furlough their staff, for example a signed employment contract. Why this evidence is not admissible has not been explained.”
Adrian Pabst, Deputy Director, said:
“The long-term impact of this situation cannot be overestimated. ONS data suggests that as many as a million people are new starters each quarter, with a further 800,000 moving jobs. Between 350,000 and 500,000 workers risk missing out on support in the hospitality sector alone, which will continue to be hit hard by social distancing rules.”
“Without financial support, hundreds of thousands if not millions of people will be left destitute, and the country will emerge from the pandemic with a huge cohort of “newly disadvantaged” families. This situation is entirely avoidable.”
NIESR’s Director Jagjit Chadha also raised this critical issue during his testimony to the Treasury Committee on 15 May, saying
“The problem with cliff edges is going to come up time and time again, for example with new starters, who in some cases have been unable to access the job retention scheme, just because they started on a particular date rather than another date. Some state-dependent policies would be very helpful, innovative and a good thing for the Government to be thinking about.”
NIESR fully support the recommendation in the Treasury Committee report to revisit the scheme and support the hundreds of thousands of people who have been overlooked. It is late, but not too late, for government to consider policy ideas such as further extending the cut-off date for CJRS, accepting alternative evidence of employment, introducing New Starter Loans or providing wage subsidies or tax breaks for firms that hire new starters.
The full report by the Treasury Committee, Economic impact of coronavirus: Gaps in support, can be read here.