The Coronavirus Job Retention scheme (JRS) scheme has been expensive, at £8 billion to date. Far from this price tag being a problem, it reflects how badly needed the JRS was, and is.
Britain is heading for horrendous unemployment levels, with even benign forecasts suggesting we will have the highest unemployment rate in more than 25 years. The record employment of the past decade has made us too complacent about the risks of lasting worklessness.
As the lockdown begins to be lifted, we should move to actively wanting some economic activity to take place. This will be a long road. Policy makers should not be thinking in terms of bouncing back to an old world, but instead aiming to optimise policy for a messy interim period dominated by social distancing
Recommendations:
Fully-flexible (hourly) short-hours working wage top-ups should be introduced to the JRS as soon as possible, with the same cap (pro-rated) and replacement rate as offered to those fully furloughed, and aggressive fines and naming and shaming for firms abusing the system in order to prevent fraud.
The Government should clarify that the use of the JRS for health reasons (shielding, self-isolating and childcare for children off school) will continue as long as individuals are expected to take such measures.
The Government should be clear that when the phasing out of the JRS begins it will ask firms to contribute towards the costs of furlough – rising from 10% of previous wages initially.
The Government should announce a draft JRS phasing for the bulk of firms that could entail the end of new entrants (firms and employees) to the JRS from the beginning of July, the gradual increasing of firms’ contributions from August, and the end of full furloughs from the start of September. Such a timetable should explicitly be a draft, to be rolled out when lockdown and economic developments allow.
The Government should implement very limited sectoral differentiation in the phasing out of the JRS, with a core timetable for the vast majority of the economy, but longer phasing out for sectors most affected by ongoing social distancing, like hospitality.
Strengthen incentives for individuals in the hardest-hit sectors towards the end of the year to take a new role elsewhere, as the wider labour market starts to recover.
If there are elements of sectors that the Government wishes to continue to support beyond the autumn, then grants and equity injections should be prioritised.
The next phase of the JRS should be supported by a broader policy package including the dialling up of generalised demand stimulus, further improvements to benefits, and comprehensive investment in back-to-work support for the unemployed.
The loss in income, profit and consumption across industries is estimated by the OBR to translate into a £130 billion reduction in tax take, roughly equal to 15% of what government was expected to receive in tax over 12 months.
The four largest sources for government taxation are income taxes and NICs – which together amounted to 41% of all expected receipts – followed by VAT, and then corporation tax. Together these four taxes account for 64% of the total tax base. Correspondingly, these taxes also account for the largest loss of taxation in a crisis — 75% of the possible tax loss so far this year.
Two sectors in particular – wholesale, retail and motor trades, and manufacturing – account for nearly half (49%) of all losses — which maps onto those industries that have been affected most by the government’s economic lockdown.
it would be a mistake to start to reopen the hardest hit sectors out of concern for the public finances. if the lockdown is lifted, workers may not return to jobs that they still believe to be unsafe. And those that are forced to return out of financial necessity may get seriously unwell and become unable to work.
Government should not be raising taxes during a crisis. More than anything, the economy needs money in people’s pockets — especially the very poorest, who most need the cash and are most likely to spend it. Instead, now is the responsible time to borrow.
After a decade of austerity, and with a growing and aging population, taxes will need to go up, not down, in the long term, if we are to even maintain public services at their current level of quality and access.
Key areas for future tax rises should be income received from wealth — such as through corporation tax, dividend income tax and inheritance — and higher rates of tax for those companies and individuals with the highest incomes.
A far better way to boost demand now would be direct investment by the government. This could come in the form of boosting public services by increasing both pay and the number of jobs for key workers, as well as by investing in much needed green and social infrastructure — such as home insulation and electrified transport — and social housing.
Local Government Chronicle: Nine things for councils to consider about the post-coronavirus world (via LGC email mailing list)
Government tends not to respond well to funding demands or organisations that lobby too vociferously about their ‘special case’ for funding. The response is generally best received when the ‘ask’ is tied up with a solution – and local government is in a position to offer a number of solutions relating to intransigent problems such as house building, low carbon energy generation, social care and balanced economic growth. These are all things that the central government machinery is poor at addressing.
There has been relatively successful devolution (although still devolution-lite) in combined authorities. More combinations of authorities in the future – with or without some reorganisation of local government structure – is likely to be a route for more fruitful conversations with central government.
It is far from clear how the relationship between MHCLG and local authorities works. In some ways MHCLG could be viewed as being institutionally opposed to devolution – and has not got a good track record in achieving good local government settlements.The argument needs to be taken to other government departments – especially the Treasury and No 10.
The funding structures for local government need to be clearly understood – even if they come with strings attached – but the political football of business rates needs to be abolished, and replaced with a new system that is entirely devolved and has no central government interference every Budget day.
Prior to Covid-19 there was a continuous process of division, setting local authorities in competition against each other to bid for relatively small pots of funding. There is an opportunity for more collective action – and certainly less competitive processes where tens of thousands of pounds are spent on bids where we know only a small percentage will be successful.
This government, prior to the crisis, was keen on infrastructure projects and the commercialisation of science to drive economic growth. Clearly, the budget envelope may now not exist, but developing projects that meet this agenda may be useful.
Economic development is needed now – more than ever before. Building the support structures, local networks and interventions that help businesses recover will be essential to ensure there is a rebound in economic fortunes.
Working from home has been proven by some local authorities to provide a new flexible and agile way of working. There is an opportunity for a new approach that ensures delivery takes place across the community rather than from an expensive central hub.
Communities get things done. Community cohesion remains in many parts of the UK and can be a genuinely useful method of rolling out some services remotely. In many areas, facilitating the development of community networks will be more cost effective than the universal low-level provision of social care (but will never replace the need for higher intervention requirements).
“an updated and interactive dashboard, to help charities and funders see the places that are currently suffering the most from Covid-19, and those that have underlying factors—such as age, health, ethnicity, economic indicators—which may put them at risk.”
Pervasive uncertainty is bad for the economy in general and for investment in particular. Given that people will need to work in different ways for some time if they are to work at all, investment and innovation will be fundamental to our short-term success.
Government should also support and help to spread innovations that make safe working practices easier, either by directly funding research or facilitating the fast spread of good new ideas. It may need to be more active in the labour market, helping workers and firms to find each other more easily, outlawing exclusivity clauses for furloughed workers, or hiring some of the unemployed directly to further public investment schemes.
(The JRS) is one of the reasons that the Bank of England is so optimistic about the medium-term economic prospects. So, we should be very careful in moving away from it. But that doesn’t mean it should remain as it is until all rules are relaxed. It is generous enough that leaving it untouched risks more businesses remaining closed than is necessary, and certainly more than was initially intended.
keeping JRS only for locked-down sectors such as hospitality would leave totally unsupported those sectors which are shutting because of a, hopefully temporary, collapse in demand. Equally there is little value, indeed a lot of cost, in providing open-ended support for sectors that look set to be smaller for some time to come. The economy post-Covid probably won’t look the same as the economy a year ago, and attempting to preserve the old economy in aspic is likely to be costly. Yet picking the winners and losers with any precision remains nigh-on impossible.
As this crisis goes on JRS will probably need to start differentiating by sector. There may need to be some elements of risk-sharing for some sectors, in which accepting payments will require some matched funding from the businesses concerned either now or in the future.
1.8 million privately renting households are now reliant on the welfare safety net to keep paying their rent.
Renters must find an estimated £13 million a week because Universal Credit is too low to cover average local rents. Many will slip into debt and fall behind on rent payments.
This could add up to a £660 million black hole in renters’ finances over the next 12 months if the government fails to act.
Outside of London, the shortfall a family renting a typical two-bedroom property and claiming Universal Credit would face can be as high as £400 a month, and in London could be up to £1,227 a month.
The household benefit cap, and LHA caps further restrict the amount that private renters in need of housing benefit can receive. Therefore, the funding gap faced by private renters in need could be even higher than this estimate.
As of 30 April, almost 700,000 UK customer accounts have been given a payment holiday on their credit card plus 470,000 payment holidays on personal loans.
27 million customer accounts have been offered three months of interest-free borrowing on the first £500 of their arranged overdrafts if needed. Any overdraft interest waived by lenders during this period will not have to be repaid at a later date.
“Interest will normally continue to be charged during payment holidays and so customers should consider their options carefully and only apply if they are facing temporary financial difficulties and need immediate help. Customers in more severe financial difficulty should speak to their lender about the most appropriate action to take, which could include speaking to an independent debt charity to talk through the options and agree a way forward.”
Policymakers should develop a new Jobs Guarantee Scheme to ensure that the newly unemployed are not left inactive, but instead given jobs, with training, that pays the National Living Wage. A new scheme should be devised in line with the following principles:
Training must be a central element. Participants should be given 20% of their working week for training and education. Workplace training should be the priority, but spare capacity in universities could be utilised to offer distance learning to some participants.
Private sector placements should be the priority. Employers benefiting from what amounts to free state-funded labour should be obliged to provide or source training for participants.
Fill the low-carbon skills gap. The scheme should prioritise the roles and skills needed to deliver the UK’s Net Zero goals, especially the decarbonisation of home heating and the installation of charging points for electric vehicles.
The scheme should be managed at a regional level. Local decision-makers, including local authorities, mayors and Local Enterprise Partnerships, should be centrally involved in management and oversight.
The response must address two parallel crises: The global public health emergency, and the fastest economic decline on record, which is not only impacting business and people, but also government and government agencies.
The key to a strong recovery is to assess the holistic impacts to systems and people created by the disaster, and create policies and programmes with benefits for communities, while being open to honest assessments of what isn’t (and wasn’t) working, then moving forward collaboratively to a stronger, more resilient, place.
Get a governance structure in place and resist calls for a czar. A single decision-maker at the top can stifle the process and discourage the type of collaborative response most effective across a number of disasters.
Understanding the local ecosystem and how different parts affect each other will be critical. e.g if we give money to restaurants to keep going, particularly if we get them to acquire a lot of debt, but we don’t restore their ecosystem, we’re only putting them more at risk of not recovering.
Equity must be part of the recovery framework from the start as well. San Francisco, for example, created an economic recovery task force, and one of its priorities is equity for vulnerable populations.
Commuting will change forever: most UK workers currently spend more than a year of their lives travelling to and from work. Hybrid office/remote working patterns may become more the norm.
Research shows that sending out-of-hours emails is not only bad etiquette – but creates a coercive work culture that requires people to be available 24/7. Social scientists argue this turns us into worker/smartphone hybrids and causes stress and burnout. Expecting quick answers to email is increasingly seen as bullying.
Video calls will be limited: Research shows that video calls are more draining and tiring than in-person meetings. Research also suggests many are shifting back to phone calls which “feel more spontaneous and flow better”.
Workers forced to continue working from cramped living spaces are desperate for alternatives. When lockdown lifts they will turn to the cafes and co-working spaces that are still in business. Before COVID-19 hit, co-working spaces were projected to increase more than 40% worldwide. Local co-working spaces, as opposed to big investor-funded brands such as WeWork, will do well.
Nearly legal housing law blog: rent arrears and corona (commentary on Labour Party proposals to grant renters at least two years to pay back any arrears accrued during this period)https://nearlylegal.co.uk/2020/05/a-five-point-plan/
A general waiver of rents would cost £6.4 billion a month, £4.4 billion of that to private landlords. As a comparison, the total NHS budget is £11 billion per month.
The right to receive rental income from your tenant is a property right protected by Art.1, Protocol No.1. Abolishing it would almost certainly be considered to be a deprivation of property and, as such, would require the state to provide compensation to the private landlord.
Cancelling rent arrears owed to local authorities will play havoc with the local authority Housing Revenue Account. Abolishing rent arrears means that money that the authority was expecting to have for those purposes has vanished, so that repairs get postponed, properties don’t get built etc.
Most housing associations have significant borrowing all of which is predicated on rental income. If that income is simply abolished then it impacts on the ability to provide services and new housing. In an extreme case it could even put the association in breach of the terms of its loans.
If you can’t simply abolish rent arrears, you need some repayment mechanism. Two years is as good a starting point as any. More importantly, it buys time for the government, landlords and tenants to decide what to do.
The scale of the arrears if lockdown is long term it is likely to mean that, in many cases, repayment is unrealistic. At that stage, a further policy choice would need to be made. Some landlords might want to negotiate a “clean break” approach on arrears (say, the tenant pays 10p in the £ or similar). The government might want to offer tax breaks if arrears are written off.
GDP growth, regardless of the form it appears to take, does not enhance life satisfaction, alleviate poverty, or protect the environment. Calls for better kinds of growth do not fully recognise the failures of economic growth, and therefore provide no viable vision for the future.
The tendency for unemployment and inequality to rise with the absence of growth in a free market economy creates a ‘growth imperative’ for policymakers, to the detriment of human and environmental wellbeing. A range of reforms could help overcome growth imperatives while ensuring the transition to a post-growth economy increases well being and decreases inequality, such as:
A universal basic income (UBI), provided through a central bank digital currency (CBDC) as a public means of payment
‘Institutionalisation’ of monetary financing as a means of supporting public spending on post-growth policies
An ecosystem of public banks to provide local communities with fairer access to credit
Higher marginal tax rates on the highest incomes, alongside taxes on wealth, financial transactions, property and land.
‘Debt jubilees’ which would see household debts cancelled or reduced
Recommendations:
As structural growth imperatives are eliminated, the ONS should stop publishing GDP figures and the Treasury should stop targeting GDP growth.
In order to eliminate growth imperatives related to the monetary and financial system:The Bank of England should: Ensure access to a public means of payment in the form of Central Bank Digital Currency. Ensure access to an alternative source of credit for SMEs via a newly-established direct clearing facility.
The Bank of England and the Treasury should engage in closer monetary-fiscal coordination to: Explore options for the issuance of a universal basic income through Central Bank Digital Currency Accounts. Enable, via financial and regulatory means, the creation and sustenance of an ecosystem of public banks. Further institutionalise the process of monetary financing and credit guidance. Collaborate on a programme exploring different possible designs for debt jubilees, and their likely impacts.
The Treasury should: Establish a formal inquiry into reducing the growth dependency of the UK economy. Reform the tax system, implementing higher marginal rates on the highest incomes, alongside taxes on wealth, financial transactions, and property and land.
The UK government should join the ‘Wellbeing Economy Governments’ alliance.
ONS should conduct a review of its ‘Measures of National Wellbeing’ dashboard and publish its wellbeing dashboard report on a quarterly basis.
The Treasury should further incorporate the dashboard into its macroeconomic framework and budgeting process.
The review of the dashboard should be based on a wellbeing framework developed by the ONS, with the Treasury’s support and public consultation, under the ‘Measuring National Wellbeing Programme’.
The Treasury should incorporate post-normal decision-making tools, such as participatory processes, into its decision-making guidance.
Members were asked to identify up until which point during the current lockdown would their businesses, or significant parts of it, be unable to survive at the current level of Government support provided. 40% said that this would happen by the end of September, for some much sooner.
This indicates that with the current level of support from the Government and the possible late August reopening of pubs, that across the wider sector, 18,800 pubs won’t survive and be able to reopen.
Such a situation would result in the loss of 320,000 pub jobs in regions across the UK.
10,000 of the UK’s 47,000 pubs aren’t eligible for any Government grant support. Only 11% of those eligible have had a successful application through CBILS and 50% through their existing banking facilities.
“This is an interactive map of Leeds. Coronavirus is dramatically changing the way that we use our cities. It’s brought lots of challenges but we are perhaps also becoming more aware of our immediate surroundings, our neighbourhoods and our neighbours. What is really important to us in our local area – be it easy to use wide pavements, the local cheese shop or the small patch of sunflowers in your local park? What should be improved to make lockdown work more fairly and smoothly? What do you value? What do you not value? What changes should stay for Leeds for after Lockdown?’
1. Find an area you like, dislike or would like to see improved
2. Click on it!
3. Choose a colour to represent how you feel about it
65% report their employer is behaving responsibly.
18% said their employer is behaving recklessly to the crisis citing practices such as lack of PPE.
46% said “my employer has gone over and above its legal duties”.
14% said “my employer is taking advantage of the crisis”.
Mental health tops members’ issues that reps are dealing with with 65% of respondents reporting having to deal with an increase in members reporting mental health-related issues.
Other issues that respondents reported increases in include ‘concerns over pregnancy, maternity, paternity, adoption or other family leave’ (40%), ‘employers or managers exploiting the isolation of individual members’ (33%), ‘bullying’ (26%), ‘issues related to disabilities’ (24%), ‘members applying for Universal Credit’ (9%), and ‘discrimination based on equality’ (i.e. sex, race, disability, LGBT+, age, religious, nationality discrimination) (8%)