The schemes designed to safeguard jobs and income for those unable to work during the coronavirus crisis have been adapted ‘as far as possible’ and were ‘the right policies for the first phase of the crisis’, chancellor Rishi Sunak has said in response to a report that criticised the gaps in support.
In its third report on the economic impact of the coronavirus, the Treasury Select Committee claimed over a million people have lost their livelihoods while being “locked down and locked out of support”, because they are not eligible for schemes like the Coronavirus Job Retention Scheme and the Self-employment Income Support Scheme.
Furlough and impact of covid-19
It says the government must assist people in this group “if it is to completely fulfil its promise to do whatever it takes to protect people from the economic impact of the coronavirus”.
One of the committee’s key concerns is the date at which an employee needed to be on a company’s PAYE payroll to be eligible for furlough. Although this date was extended from 28 February to 19 March, which the government said brought more than 200,000 additional employees into the scope of the scheme, some employers reported it meant some individuals who previously met the criteria for support became ineligible.
Trade body UKHospitality told the committee: “When the extension was made to 19 March, a new requirement was imposed which meant that you not only had to be on the payroll; you had to have participated in an HMRC RTI [Real Time Information] event… Correspondingly, quite a number of people in our businesses who had previously been classified as furloughable, who had been on the payroll at the end of February but had not had an RTI event, are now excluded.”
Many limited company directors also missed out on support if they mainly paid themselves through dividends from company profits and only received a small income via PAYE, according to the committee.
The report says: “While we acknowledge that protection against fraud needs to be a key consideration in policy design, hundreds of thousands of individuals are suffering financial hardship through no fault of their own. Either their unfortunate timing in starting a new job, or their employer’s choice of timing in submitting paperwork to HMRC, will have made them ineligible to be furloughed and unable to claim support.
“We urge the government to find a way to extend eligibility criteria to all new starters, perhaps by further extending the cut-off date to 31 March, or widening access by accepting alternative forms of evidence that can demonstrate an individual’s employment, such as a signed contract of employment.”
The committee also asked for tronc payments made via PAYE to be included when assessing entitlement to furlough.
In his response published today, Sunak defended the scheme’s eligibility criteria and said the RTI requirement was necessary to prevent fraud.
“This is why the government has been comprehensive in the economic response it has rolled out,” he says in a letter to Treasury Select Committee chair Mel Stride.
“Those unable to access the CJRS or SEISS could look for support from the many measures we have launched to make sure people get help at this time. The government has ensured people who needed it received help with their utility bills and had access to mortgage and consumer credit holidays. To make sure we reached the most vulnerable, the government gave local councils an additional £500m to provide all recipients of working age local council tax support.”
Sunak says the government has supported 9.4 million employees, 1.2 million employers and 2.7 million self-employed people through the various schemes that were designed to be “open an accessible to as many people as possible. The total value of CJRS claims so far is £28.7bn.
He also notes that tronc payments cannot be included when calculating CJRS payments where they are made at the discretion of an employer or client.
“This is because the objective of the CJRS is to help employers whose operations have been severely affected by coronavirus to retain their employees and protect the UK economy. To achieve this, the grants compensate employers for the payments that they are obliged to make in order to avoid the need for redundancies.”
He says the CJRS and SEISS were “the right policies for the first phase of the crisis”, but the government’s approach now needed to evolve.
“The government’s Plan for Jobs is the necessary next step after Covid-19. To rebuild and recover, we must support, protect and create jobs. This is exactly what we are doing,” the letter adds.