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As the UK faces its fourth week in lockdown with no exit in sight, the country is now being confronted with unprecedented economic devastation across every industry UK-wide.
Many businesses are suffering cash flow problems and thousands have furloughed their staff.
This has been made possible through the introduction of the Job Retention Scheme (JRS) which is estimated to cost the country around £30-£40bn for every three months it is in action.
Millions of workers have been left jobless, while others have been left confused over their employment rights during the crisis.
According to the British Chamber of Commerce (BCC) around 9 million workers in the UK will be furloughed as a result of the pandemic. What remains to be seen is the long-term impact that this will have on the economy, and many are questioning what will be left when the crisis is over.
On 20 March, Chancellor Rishi Sunak announced the government’s first wage package rescue plan intended to protect citizens from financial ruin.
The package includes the Statutory Sick Pay (General) (Coronavirus Amendment) (Suspension of Waiting Days and General Amendment) Regulations 2020. Under the amended legislation, if an individual has symptoms of COVID-19 and is subsequently forced to self-isolate, they will be entitled to Statutory Sick Pay (SSP) after receiving an isolation note.
The amount of money an individual will receive on SSP is £94.25, which will be paid to the individual’s employer for up to 28 weeks. If an individual takes precautionary measures and chooses to self-isolate, they will not be entitled to SSP.
Additionally, those who are self-employed, or earn under the lower earnings limit of £118 per week and are forced to self-isolate are not entitled to this. Instead they are eligible to apply for Universal credit or Employment and Support Allowance.
Workers are also protected against unfair dismissal for self-isolation under the Employment Rights Act 1996.
Meanwhile, the JRS means that the government will cover 80% of the wage costs of employees who are furloughed. This extends to a maximum of £2,500 a month.
Speaking about the initial scheme, a Treasury spokesman said: “The purpose of the Coronavirus Job Retention Scheme is to keep people in employment, protecting people’s jobs and incomes and reducing long-term damage to the economy”.
After many voiced concerns that self-employed workers in the UK would fall through the cracks, on 26 March, the Chancellor announced the Self-Employment Income Support Scheme (SEISS). This allows those who are self-employed, and those in partnerships access to a taxable grant. This is worth 80% of their average monthly profits, up to a maximum of £2,500 a month, calculated based on the worker’s last three years of tax returns.
Under the Coronavirus Act 2020, workers can also opt for a new type of statutory leave namely, Emergency Volunteering Leave (EVL). This was introduced to provide support for essential health and social care. However, not everyone can take EVL. Exceptions include those who work for small businesses with less than 10 staff, those who are employed by the legislature/ House of Lords, and those who work as police officers.
The Working Time (Coronavirus) (Amendment) Regulations 2020 means that workers who haven’t taken their annual statutory leave can carry it over to the next two years.
Additionally, further legal clarification concerning the furloughing staff has been made by the high court. If a business has fallen into administration, the advice given said: “We would expect an administrator would only access the scheme if there is a reasonable likelihood of rehiring the workers”.
While Chancellor Rishi Sunak called the package “unprecedented,” many are concerned that the measures are just not enough to save millions from poverty and desperation.
In response to backlash and 70,000 petition signatories on 16 April, the government extended the JRS cut off from 28 February to 19 March.This means that an additional 200,000 people are now eligible for the scheme which is intended to end 31 May.
However, according to BCC, two-thirds of respondents to the organisation’s weekly tracker poll are still awaiting funds from the furlough scheme as payday fast approaches. Similarly, many self-employed workers fear for their financial security, as the SEISS is not available until June. Those who have recently gone self-employed also appear to have been left behind here, as they are not eligible for SEISS.
Research from the Association of Independent Professionals and the Self-Employed (IPSE) found that despite these measures 45% of the self-employed fear they do not have the funds to cover basic costs. On top of this, 60% said that the schemes provided by the government were not enough to sustain their income and businesses.
Andy Chamberlain, Director of Policy at IPSE said: “This research shows that it is not just a few self-employed people falling through the cracks in the government support: right across the sector, freelancers are facing dire financial damage because of the Coronavirus crisis”. He added: “The lack of support for limited company directors in SEISS is not just a crack: it is a gaping hole in the package. The government must act quickly to fill it”.
Meanwhile, UK Hospitality is urging the government to extend the furlough scheme until July. This, they say, will help to prevent an estimated one million workers being laid off due to companies being unable to generate revenue during the lockdown.
Critics of the JRS also argue that the scheme is “fatally self-defeating” due to it preventing furloughed staff from continuing work, even remotely. Peter Franklin, writing for UnHerd highlighted that instead of preparing the economy for recovery, it instead endangers the future lives of businesses.
With around 1.2 million new applications for Universal Credit since the outbreak, many are looking past the crisis and questioning what will happen in its wake.
The Resolution Foundation has estimated that a 6 month lockdown will lead to 5 million unemployed in 2021 as the JRS fades out. The report also suggests that it could take from two to five years for the economy to bounce back, if the lock down is extended to 6-12 months. The report also forecasts a long-term dip of 5% to 7%.
Speaking about the potential long-term impact of the virus, Richard Hughes, Research Associate at the Resolution Foundation, said: “The Government must prepare for a scenario in which the numbers of people out of work could far exceed the levels experienced during the 80s and 90s recessions”. Subsequently, there have been suggestions that furloughed staff could be reintroduced into work on a part-time basis, to prevent total collapse.
Others, such as Lynn Dobbs Vice-Chancellor of London Metropolitan University have called on universities to utilise their resources to instigate social mobility after the COVID-19 crisis. She suggests that the unemployed should be encouraged to return to education and that this could be done through ensuring greater flexibility with loans. However, this position seemingly misunderstands the situation. Arguably the skills required to thrive in this new economy will not be those acquired from traditional university education.
Universal Basic Income could potentially hold the key to stability until businesses are able to emerge and thrive once again. Guy Standing, a Soas Professor and a Co-Founder of the Basic Income Earth Network has said that now is the perfect time to launch a UBI scheme. Speaking to Wired, he said that considering that the modern economy is “inherently fragile” extra pressure from the Coronavirus pandemic, will push it to the brink, but that UBI could save millions from “economic insecurity”
Ultimately, the virus has revealed that those who earn the lowest income, often without job security, or sufficient and appropriate employment rights are what keeps the country on its feet. As such, this should be recognised and rewarded once the crisis is over.
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