Labour welcomes changes to income schemes – but warns against ‘one size fits all’ approach

Labour has welcomed the changes to coronavirus income support schemes announced today by the Chancellor – but warned the government against a ‘one size fits all’ approach.

Rishi Sunak has extended the coronavirus self-employment income support scheme (SEISS), due to end this weekend. 113 MPs had demanded an extension to the mechanism currently supporting millions.

In August, self-employed workers will be able to apply for a second and final coronavirus support payment equivalent to 70% of their monthly profits, capped at a total of £6,570.

The Chancellor also confirmed that employers would need to start contributing to furloughed workers’ salaries, and he introduced flexibility to the scheme by allowing part-time work from July.

From August, the taxpayer contribution to wages will still cover 80% of furloughed wages, while employers will be asked to pay National Insurance and pension contributions – 5% of total employment costs.

In September, taxpayers will pay 70% and employers 10%; in October, taxpayers will pay 60% and employers 20%, Sunak revealed today. The job retention scheme will then close.

Commenting on these changes, Anneliese Dodds said: “It is welcome that the government has heeded Labour’s calls for a more gradual introduction of the employer contribution to furlough, the introduction of flexibility within furlough to allow part time working, and the extension of the self-employed scheme.”

But the Shadow Chancellor expressed concern that a “one size fits all approach” was being adopted to coronavirus support programmes over the coming months despite the varying impact on different sectors.

“However, it is concerning that there is no commitment within these plans for support to only be scaled back in step with the removal of lockdown. Nor is there any analysis of the impact on unemployment of a ‘one size fits all’ approach being adopted across all sectors.

“The Chancellor must publish the evidence behind these decisions to provide reassurance that his proposals won’t cause an additional spike in unemployment, and an even more difficult economic recovery from this crisis.”

In response to the announcement this afternoon, the TUC also welcomed both the short-time furlough from July – branded “another union campaign win” – and the extension to SEISS.

TUC general secretary Frances O’Grady said: “We’re glad the chancellor has listened to unions and allowed employers to start using short-time furlough from July. This will help employers gradually and safely bring people back to work, protect jobs and support the economy to recover.

“As employers begin to contribute to the costs of furlough, we remain pleased that all workers will continue to receive at least 80% of their wages for every hour worked until the scheme closes in October.

“However, the government needs to act urgently to make sure workers with health conditions or childcare responsibilities aren’t first in line when it comes to redundancies. The UK cannot afford the misery of mass unemployment.

“The government must start planning now to build on the job retention scheme with a national recovery plan that prioritises protecting and creating jobs. That means a jobs guarantee scheme so that everyone can get a decent job on fair wages.

“And working with unions and business to deliver support for strategic industries that have the potential for many good jobs once the outbreak is controlled. We can work our way out of recession – together.”

The GMB trade union said: “The Chancellor’s furlough plans provide a valuable lifeline for business and workers – but people mustn’t be abandoned while the economy is still stuttering.

“In October, lots of sectors – leisure, hospitality, aviation – may still be on their knees. Those workers can’t just be thrown to the wolves.”

Amid fears that unemployment will increase further when compulsory employer contributions to furlough come in, the TUC has repeatedly called for a jobs guarantee scheme – in particular for young workers.

The trade union federation is also calling for a furlough scheme beyond October for companies with significant fall in turnover and employees cannot return to work due to personal circumstances.

Unite the Union has said that changes to support schemes should “go hand-in-hand with an immediate and strategic programme to create new green jobs as part of a just transition”.

Although 7.5 million jobs have been covered by the furlough scheme, unemployment has risen. Over two million new claims for benefits were made in the two months following the start of the lockdown.

Around 935,000 businesses have used the job retention scheme and a further 440,000 claims were made on the first day of the government’s equivalent income support scheme for the self-employed, according to the Resolution Foundation.