Labour demands Chancellor fix holes in wage support schemes

Labour has demanded that the Chancellor fix the holes in the wage support schemes after he delivered an economic update on Monday containing no new announcements for businesses or workers in the Covid health crisis.

In a letter sent to Rishi Sunak this afternoon, Labour’s Bridget Phillipson urged him to make changes to government support that will help those currently excluded and boost the country’s recovery from the coronavirus pandemic.

Highlighting that Sunak had been absent from parliament for 41 days, during which time significant further Covid restrictions were put in place, the Shadow Chief Secretary to the Treasury criticised him for having “nothing new to say”.

Phillipson said: “His failure to address the gaps in his economic support schemes has left millions with no support for almost a year, and his refusal to extend eligibility for the furlough scheme past October means ever more people are missing out.

“Small businesses were the engine of economic recovery after the last recession, but anyone thinking of starting a new business will think twice after seeing how this government treats the self-employed – and that will damage our recovery.”

In her letter to the Chancellor, Phillipson warned that “many people across the UK feel like a lifetime of hard work is slipping through their fingers” and urged him to take action urgently. The Labour Party has proposed that the Chancellor:

• “Update the eligibility criteria for the coronavirus job retention scheme so that people who started new jobs after October 31st can qualify for support.
• “Sort the gaps in self-employed income support scheme, which is unchanged almost a year after it was first introduced in haste.
• “Redirect some of the £2bn in business rate relief returned to the Treasury by supermarkets and other large retail businesses to support those who have been excluded from support for over nine months.”

Sunak’s update on Monday, following the announcement of the third lockdown in England, was criticised by Labour for failing to provide new information on support that “businesses and workers desperately need”.

The Chancellor had outlined what he described as the government’s “comprehensive economic plan”. But he announced no new support despite the additional restrictions imposed by the government to reduce the spread of Covid.

The Shadow Chancellor slammed Sunak for giving a “highly partial picture of the state of our economy” to the Commons and accused him of having been “nowhere to be seen” when the latest lockdown in England was announced.

The Federation of Small Businesses warned at the start of the week that a quarter of a million small businesses are at risk of folding across the country, which Labour has argued puts Britain’s economic recovery from the pandemic at risk.

Research from the Institute for Public Policy Research showed that after the 2008 financial crash small and medium-sized businesses were central to the recovery in the labour market, accounting for 84% of jobs growth between 2010 and 2013.

Below is the full text of the letter sent to Sunak today.

Dear Chancellor,

As we find ourselves in yet another lockdown, and with over nine months having passed since you announced the two schemes, I am writing about gaps in the Coronavirus Job Retention Scheme (CJRS) and Self-Employment Income Support Scheme (SEISS), as many businesses and workers continue to fall through the cracks. I was hoping further information on the future of both these schemes would form part of your statement in the Commons on Monday, but it was not to be.

When both schemes were launched in March last year, it was immediately clear that significant numbers of people would not be eligible for support. This included the self-employed, many freelancers and those on short-term contracts. As you will know, such employment arrangements are not always a choice: for too many people they are the unavoidable reality of a precarious labour market.

The Institute for Fiscal Studies noted that many would “fall through the gaps completely” and estimated nearly two in five people with some self-employed income were excluded. IPSE warned many self-employed were “utterly despondent” and reported fears about covering basic costs like rent and utilities. Meanwhile, the Resolution Foundation found that one in five self-employed workers who did not claim the SEISS had zero income in September.

For over nine months, Shadow Chancellor Anneliese Dodds has consistently raised these gaps directly with the Treasury, including three separate interventions last April alone.

The government claims many of the biggest gaps result from administrative or operational constraints and reflect the need to deliver novel schemes at speed and scale as the virus spread quickly in March. However, the government has proved unwilling to address these operational issues in the nine months that have passed since. This is despite a number of constructive and creative fixes proposed by business, unions, think tanks and MPs, including the cross-party Treasury Select Committee, and the many contributions from across the House at the Westminster Hall debate last month.

Instead, the government spent last summer looking to wind down support schemes as quickly as possible, despite continued economic disruption and warnings from business, unions, the Labour Party and even its own backbenchers. Scientists also continued to warn about the continued prospect of the resurgence of the virus, raising the possibility of future lockdowns and a need for new support measures long before the government accepted the need for these.

The government’s refusal to fix the gaps in the CJRS and SEISS means they have been repeatedly extended with only minor changes to their eligibility criteria. Many businesses and workers excluded since March will remain without support through a long and difficult winter and by the time the schemes come to an end in April will have gone over a year without support.

In that time many of these problems have actually got worse because of the government’s inflexibility. In particular, your recent welcome decision to extend the furlough scheme to the end of April without changing the eligibility cut-off dates, means that people who started new jobs on or after 31 October are ineligible, and is causing very real hardship for people with seasonal work this winter.

Taking up posts before new tiered lockdowns were announced, they cannot be furloughed from those new employments despite the reality of a very different economic context from the one in which employment was offered. Your own Job Support Scheme rightly took account of these circumstances with the JSS-open and JSS-closed distinction, but a similar flexibility is missing and urgently needed within the CJRS.

This New Year, many people across the UK feel like a lifetime of hard work is slipping through their fingers. I am concerned that the failure to support self-employed people in this crisis will have lasting consequences for our economy. I fear that the government’s complacency and inaction in offering adequate support to those in self-employment will put people off who are thinking of starting new firms, and make it harder for our country to see the sustainable growth we so urgently need. After the 2008 financial crash, research by the independent Institute for Public Policy Research (IPPR) showed that small and medium-sized businesses were central to the recovery in the labour market, accounting for 84 per cent of jobs growth between the start of 2010 and the start of 2013. It is vital that a fear of being left high and dry by government complacency doesn’t hold back the recovery we all want to see.

The government cannot continue to make excuses and blame operational problems for its unwillingness to support those who have slipped through the cracks. It must urgently work with business, unions and MPs to find creative and practical solutions and ensure support is available to those who have missed out. I urge you to review and improve the SEISS in the coming days. It was not designed to deliver support for almost a year and needs to be updated to reflect the duration and scale of the challenge we still face.

The huge sums returned to government in recent weeks by retailers who found they didn’t need the support means that there is space for the government to do more and do better for these people, without changing the financial envelope you originally set down.

I urge you to move quickly to update the eligibility criteria for CJRS, review and improve the SEISS, and move to support Britain’s recovery and Britain’s entrepreneurs.

Yours sincerely,

Bridget Phillipson MP
Shadow Chief Secretary to the Treasury
Member of Parliament for Houghton & Sunderland South