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On 17th March 2020, just a few days after the Budget speech, Rishi Sunak while appearing in front of the House of Commons of the United Kingdom had announced a number of major schemes to support the economy to address the financial impact of the Covid-19 crisis on the nation. The three schemes that were most talked-about – Job Retention Scheme, The Coronavirus Business Interruption Loan Scheme (CBILS) and Covid Corporate Financing Facility (CCFF). While the latter too was designed to support both small and large businesses during this tough time by allowing them to avail loans at a lower cost and also to allow bigger firms to sell commercial papers to the Bank of England, respectively. The Job Retention Scheme was announced for the general people, who either had been or were probably going to lose their jobs or were likely to lose out on their salaries for the upcoming weeks and months, as it had become clear that the companies would have to stop all their operations as the fear of the community transmission of the covid-19 disease kept on increasing.
The Job retention scheme mainly allowed the companies who would subscribe to the PAYE programme of the government, to avail cash grants worth up to 800 per cent of the total employee’s salaries, with a limit of £2500 per employee. A lot of the firms, who have put their staff and employees on furlough, were expected to avail this programme of the government and it was reported that approximately 9000 of HMRC’s staff would participate in the various different processes at the time of the implementation of the programme. The entire process was to be done through an online portal, which was opened with the week starting on Monday, 20th April 2020.
It was reported that the entire programme was prepared within just 2 days by Her Majesty’s Department of Revenue and Customs (HMRC) and was untested in terms of international standards. Hence, the critics were calling out the possibility of success of this scheme immediately after it was announced.
Some experts feared that the web portal would crash, as it had been built to allow just 450,000 users at the same time, and more might apply. While HM Revenue & Customs has deployed 9,000 workers to manage inquiries, the head of the tax office fears that the telephone lines could be clogged if some companies did not pay the salaries by themselves
How the Job Retention Scheme fared in the beginning
It has been reported that since the scheme went live on 20th April 2020, the number of claimants has kept on decreasing day by day. The data from HMRC suggests that the first day, which was Monday, saw approximately 185,000 claims made on the portal, while Tuesday saw only 124,000, even though the portal was open for the entire 24 hours on that day. If certain other sources are to be believed, the claims for Wednesday, 22nd April 2020 fell even further. By Tuesday, a total of £2.6 billion had been claimed for 2.6 million employees of the country. The estimation from the Office of Budget Responsibility had previously estimated that approximately 8 million people would end up being on the programme, but the latest numbers suggest that the total number of claims might be lower than that had been previously estimated. As per some experts, if the numbers do remain to be on the lower side, it would suggest the fact that the economy of United Kingdom had been stronger and more resilient in fighting off the Covid-19 crisis during the lockdown, then what had previously been expected. But the department of the treasury is still waiting to see where the total number would end up to be after all the claims will be processed, as the employment department had stated that they would receive more claims on account of the number of applications that had been received by the government previously, and hence, no part of the government was currently sitting in comfort patting their own backs for the development.
Another worry is regarding the temporary workers in the country, as some believe that they are the most vulnerable of the entire population because they are not under any company’s full-time contracts and if asked to leave, they won’t be covered under the job retention scheme of the government, even though HMRC had made it clear that they would be considered even if their employees furloughed those workers. The fear is mainly due to the fact that the employers for temporary workers do not themselves cover their compensation and rather do it from umbrella companies, or they are under zero hour contracts and hence the employers themselves incur no costs in compensating these employees, a situation that could put them under a very difficult situation.
Extension of the Furlough Scheme
Even though just prior to the full blown Covid-19 crisis happened, the ONS had reported that the employment situation in the country was at its strongest ever, with almost 76.8 per cent employment level in the country. This was partly due to the high level of economic activity in the country as UK was trying to come back on track after getting Brexit done on the last day of January.
This data point put the government in a tight spot, as even though it is a good statistic, but it also means that the government would be liable to cover more salaries under its Coronavirus Job Retention Scheme. For this reason, the HMRC had decided to extend the total period of the scheme by about a month and a half, so that everybody could be covered and at the same time redundancies in the data for the eligible people could be avoided. The department had been under immense pressure from both citizens as well as businesses on the point that if this support did not happen, a large number of people could have been laid off.
The extension of this scheme also means that the government may have to spend approximately £14 billion to cover all the claims, while the Office of Budget Responsibility claims that approximately £42 billion would be required to cover 30 per cent of Britain’s population, which is a small cost in the larger scheme of things, and something that will help millions of people survive, especially during such a massive healthcare crisis as well.
It remains to be seen if this previously untested programme would be effective or not, but it is sure to provide a considerable support to both businesses and individuals in general, who would not be losing their jobs and their pay at the same time.
