The UK is entering the Covid-19 crisis with a social security system that is failing badly. Britain’s system of benefits and tax credits leaves millions of people in poverty – with many in outright destitution – and also offers totally inadequate social insurance for people from all backgrounds who hit hard times. There is no time to invent a new system, even though the one we have today is very flawed. But there is ample opportunity to adapt social security quickly to serve today’s extraordinary needs.
In 2019 the Fabian Society published Where Next? Reforming social security over the next 10 years which examined options for long-term social security reform. Many of the measures proposed in that report are not relevant to the immediate Covid-19 crisis; but the research for the project provided us with a wealth of insight and evidence on options for short-term social security policies which can now be implemented quickly and easily. These options are in addition to the social security package announced by the chancellor in Budget 2020.
The Fabian Society proposals are to:
- Increase the generosity of statutory sick pay and the contribution-based allowances for sickness and unemployment to match statutory maternity pay (£151 per week from April).
- Make payments to employers to cover the wages of employees who face temporary lay-offs, short-time working or unavoidable caring responsibilities.
- Increase the maximum rent supported through the housing element of universal credit (or local housing allowance) in each local area.
- Make one-off payments to families affected by school and nursery closures.
- Pay universal credit as soon as an application is validated and also suspend sanctions, conditions and assessments for the duration of social distancing measures.
- Scrap 2020/21 council tax payments for households with very low incomes.
The proposals in this paper are targeted measures designed to support specific groups most disadvantaged by the Covid-19 crisis. They do not cover broad-based social security reforms or benefit increases. However in due course an economy-wide demand stimulus is likely to be required (ie once people are again in a position to spend without constraint). This should include social security measures because a stimulus via tax cuts or Bank of England asset purchases alone will be inefficient and regressive (eg a VAT cut will benefit the richest fifth of households three times more the poorest fifth, because they pay over three times as much in VAT). Options for broad-based social security measures include increases in the value of universal credit and child benefit or the introduction of a new universal payment (a time-limited universal basic income). Future Fabian Society analysis will return to these ideas.
Temporary lay-offs, short-time working and time-off to care
Proposal: introduce a new scheme for employees subject to lay-offs or short-time working and for those who need to take time-off to care so they are paid in full by their employers.
- The new scheme would require employers to pay workers in full if they are not able to work some or all their hours while social distancing measures are in place (either because of caring responsibilities or no work being available).
- HMRC would pay employers 90 per cent of the wages associated with the lost hours up to a cap of £16 per hour.
- The scheme would use the existing arrangements for statutory maternity pay (and similar programmes) with wage subsidies administered through PAYE payroll software
- Employers would provide the government evidence of the reduced hours. Payments to employees with variable monthly hours would be based on their average monthly wage for the previous six months.
Sickness or self-isolation
Statutory sick pay
Proposal: upgrade statutory sick pay to match statutory maternity pay.
Minimum sick pay of 90 per cent of earnings for the first two weeks.
- £151.20 per week thereafter (from April 2020).
- Introduce a temporary refund scheme for employers via PAYE payroll software (as is available for other statutory pay schemes). As with statutory maternity pay this could cover a fixed percentage of the costs of payments.
- Also extend eligibility for statutory sick pay = to employees earning less than £118 per week (where average weekly earnings are below the proposed value of statutory sick pay, employers would pay a worker’s actual previous earnings).
Employment and support allowance (contribution based)
Proposal: increase short-term ESA to match maternity allowance.
- Pay £151.20 per week during the ESA ‘assessment period’ (first 13 weeks) for the duration of the Covid-19 crisis at least.
- Also treat ESA as earnings in universal credit assessments (to avoid the extra money being clawed-back pound-for-pound through less universal credit).
- Suspend all face-to-face capability assessments and make awards on the basis of evidence from GPs or other clinicians who know the claimant.
Job seeker’s allowance (contribution based)
Proposal: increase JSA to match maternity allowance.
- Pay £151.20 per week during the period of the JSA claim, for the duration of the Covid-19 crisis and any subsequent recession.
- Increase the duration of claims to nine months (assuming the immediate crisis leads to recession).
- Also treat JSA as earnings in universal credit assessments (to avoid the extra money being clawed-back pound-for-pound through less universal credit).
- Suspend work-search and interview requirements for the duration of social distancing measures.
Low income households
Proposal: introduce emergancy reforms to universal credit (and legacy benefits) to reflect the Covid-19 crisis.
- Scrap the 5-week wait by introducing an immediate initial payment for universal credit based on declared income (ie before HMRC earnings data is available).
- End all sanctions and scrap work-related conditions for the duration of social distancing measures.
- Suspend all face-to-face capability and PIP assessments and make awards for up to a year on the basis of evidence from GPs or other clinicians who know the claimant.
Proposal: Increase the maximum rental support provided through universal credit (or local housing allowance)
- Raise the maximum eligible rent that can be supported to 1.2 times the 30th percentile of local rents in each area, using existing Valuation Office Agency data.
- Either adopt this measure as a temporary measure for 2020/21 or as a permanent feature of the system.
- Also enable landlords and tenants to be able to request direct payment to landlords if a tenant enters rent arrears.
Support for families with children
Proposal: Introduce one-off payments to cover the costs arising from periods of school and nursery closure for all children (eg a single payment to cover a 6-week closure).
- A one-off payment for all children who receive child benefit equivalent to £5 per child per week, for all children aged two to 18.
- This payment should be in addition to the government’s promise of vouchers for children on free school meals (which should be worth at least £12 per child per week to match the value of free school meals).
Proposal: For the 2020/21 financial year end council tax payments for households with very low incomes.
- Require councils to introduce new council tax support schemes with 100 per cent tax reduction for working-age households with no income apart from benefits.
- This extends the Budget 2020 announcement which allocated £500m to councils to fund more generous council tax relief schemes and would be no more complicated to implement than the chancellor’s announcement. Councils will require extra support to implement this more generous policy.