Economists warn UK low-paid need more support amid coronavirus
The UK government must do more to support individuals as they deal with the economic fallout from the coronavirus epidemic, leading economists have said.
Prime Minister Boris Johnson today announced new government advice for people to avoid “all unnecessary social contact” and for those with any symptoms to stay at home for two weeks.
Torsten Bell, director of the Resolution Foundation think tank, today told MPs the UK is likely to see a “large number of people losing their jobs, hours being cut, businesses in trouble”.
Bell was speaking at a Treasury Committee hearing about last week’s Budget, which saw chancellor Rishi Sunak launch a £12bn stimulus package to tackle the effects of the outbreak.
Policies from the budget included the abolition of business rates for small firms for a year and a change to benefits to let those on employment and support allowance to claim from day one instead of day eight.
Bell praised the policies but said: “If we look at the direct support for individuals it is much smaller than anything on firms and is probably the area most in need of urgent coming back to.”
He called on the government to do more to support the 2m people who earn below £180 a week who are not entitled to any statutory sick pay.
Linda Yueh, professor of economics at Oxford University, suggested to the Committee that the government could adopt a worker compensation scheme like Denmark’s.
The Danish government today said it will cover up to 75 per cent of wages of workers in the private sector who lose their jobs due to the coronavirus crisis.
Bell said the UK’s long-standing benefits freeze meant the “safety net is too weak” to support individuals who lose their jobs during the crisis.
“That was bad policy for the individuals… but now it is bad macroeconomic policy. It means we have a weaker set of automatic stabilisers to support the economy.”
“We should be urgently looking to strengthen that safety net. That is a much more effective fiscal stimulus than most other areas.”
Sunak said last week that the government would unveil more policies to support businesses and households.
Paul Johnson, director of the Institute for Fiscal Studies (IFS), said supporting businesses was the right approach. He said he would be “astonished if the chancellor didn’t come back with more in the coming weeks”.