Resolution Foundation calls for £22bn package to support workers facing lay-offs and families facing big income shocks

The government should introduce a new Statutory Retention Pay (SRP) scheme to support struggling firms and prevent mass job losses among the five million employees in sectors critically affected by the coronavirus shutdown, as well as wider support to limit the living standards hit to families, according to a new Resolution Foundation report published today (Thursday).

With the scale of the coronavirus pandemic – and the public health response to it – having escalated since the Budget last week, the Foundation says that the Chancellor needs to significantly step up the scale of support for affected workers and rethink the approach to helping struggling firms.

The report notes that the public health advice to stay at home and avoid social interactions will have a critical impact on sectors such as retail (excluding food), hotels and restaurants, airlines, travel operators, cleaners and personal service workers. Together, these sectors account for around a fifth of the workforce (five million employees and 1.2 self-employed workers).

The Foundation argues that the pace and scale of the current economic shock will very quickly lead to mass job losses unless urgent action is taken, especially as working from home is less viable in many of these jobs compared to higher-paid, while collar jobs.

The report notes that less than one in ten of those in the bottom half of earners say they can work from home, while, those in the most at-risk sectors and occupations also have less to fall back on, being around 25 per cent more likely than average to live in families with no savings at all.

The report calls for a new approach to supporting workers and their families. Alongside the extension of sick pay to two million low earners currently excluded, this plan includes:

New Statutory Retention Pay (SRP) for staff whose jobs are temporarily not needed because of the shutdown. This scheme, modelled on Statutory Maternity Pay (SMP), would retain the link between firms and staff, thus avoiding the need for mass redundancies, and enabling firms to pick up activity quickly once the shutdown restrictions have eased. Supporting a million workers via a flat-rate scheme of £151 per week for an initial six months would cost around £3.6 billion, while a more ambitious earnings-linked scheme, in which staff are paid at least two-thirds their typical salary (above the minimum £151 per week threshold) would cost around £8 billion. The Foundation notes that, in line with SMP, firms would receive these costs back from government, with those able to do so encouraged to top up payments closer to 100 per cent of typical salaries.

Increasing unemployment benefits and Universal Credit to £100 per week. Even with SRP, a rise in unemployment is now inevitable as some firms go bust and the self-employed lose work. To strengthen the safety net that many families will rely on in the months ahead, the government should increase the generosity of Jobseeker’s Allowance (JSA), Employment Support Allowance (ESA), and the standard rate of Universal Credit (UC). From April these benefits will pay just £74 a week to a single adult (and just £59 to those under 25) when losing their jobs. This is the same as they were paying in the early 1990s, despite the economy growing by more than half since then. Increasing their value by around a third to £100 per week (for an adult aged 25 and over) would cost around £10 billion a year. Going further to uprate other means-tested working-age benefits by 10 per cent would cost a further £3 billion.

The report notes that the combined package of a new SRP scheme, increased unemployed support, wider uprating of benefits and extending SSP would cost around £22 billion.

Torsten Bell, Chief Executive at the Resolution Foundation, said:

“The Chancellor has said that he will do ‘whatever it takes’ to support the country through the coronavirus-induced economic shock. That commitment now needs to be extended to the millions of workers and their families whose livelihoods and living standards are affected by the shutdown.

“In order to avoid mass redundancies in affected sectors, new Statutory Retention Pay would allow firms to put workers on paid leave with the state paying them at least two thirds of their wages during the shutdown. This will ensure they can pick things up quickly when conditions improve.

“But the scale of the economic shock facing the country means that many families are going to rely on our social security safety net over the coming months – a safety net that has shrunk considerably over the past decade. To address this, the government should increase unemployment support by a third to £100 a week.

“This approach would show the government is committed to doing whatever it takes to support family budgets, and cushion the living standards hit from the wider economic shock.”