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20 March 2020

Rishi Sunak makes a big offer for salaried workers, but freelancers need more

The question that should be asked – are the holes in these announcements about manpower, ideology or structure?

By Stephen Bush

Rishi Sunak has unveiled a big and serious offer for contracted workers, pledging to guarantee 80 per cent of people’s wages up to £2,500 a month – effectively guaranteeing 80 per cent of the salary of everyone earning median income or below in every region of the United Kingdom.

As far as salaried workers are concerned, this completed the direction of travel signposted in Sunak’s original crisis-fighting measures unveiled in his budget just nine days ago. Guaranteeing at 80 per cent is a sensible solution, because the government want to encourage a prolonged period of social distancing – which means providing the economic security for people to do so and maintain as many of their current consumption habits as they can. But people spending the money freed up through the loss of their commuting costs will likely boost demand. The aim of the world’s Covid-19 measures is for demand to fall – a recession is the point. What the world’s governments are trying to do is basically take a prolonged Christmas holiday – economic activity stops, but the economy recovers after the Christmas break as if it had never happened. So as far as salaried workers are concerned it is mission accomplished.

But it fell short on three measures: general support for the self-employed, statutory sick pay remains far too low, and while some of the barriers to claiming Universal Credit have been ripped out, barriers to doing so remain. Most egregiously, the five-week wait to claim Universal Credit remains in place; it is far from clear why this would be the case when Universal Credit now needs to support freelance workers, who aren’t paid monthly in arrears at any time, and to encourage immediate self-isolation.

So, why did it take nine days between Sunak’s budget, which was the best in class as far as global economic responses to the outbreak at the time, and this statement – a period during which global governments pulled well ahead of the UK in terms of their income protection policies? It’s striking that at every one of these statements, the remorseless logic of Sunak’s sensible and mainstream methods to ride out the economic shock of tackling Covid-19 has won against the DWP’s arguments about how Universal Credit should work outside of a crisis. The conditions once lauded as essential to its functioning have been eroded. Barriers to claiming Universal Credit have been removed. I think, in order to avoid widespread – and politically untenable – hardship, the rest of the project will have to give way to what Sunak is trying to accomplish. The five-week wait will have to go. But is the tussle between the political priorities of the DWP and the economic logic presented by the Treasury taking up time and energy and, perhaps contributing to a nine-day wait for clarity on household incomes?

Or is it that the new-look joint team of Downing Street special advisors is underpowered? One fear that some civil servants had is that while Sunak himself is a hugely qualified economist who has boosted morale among his officials, with a good personal relationship with his shared aides, he has no equivalent of Ed Balls or Rupert Harrison or Torsten Bell, serious policy thinkers who can make sure his writ runs and can provide political direction? Is it that the Treasury just needs more manpower to tackle the crisis in general? Treasury officials are understandably still being brought in to work on the issue – does the government simply need to hire more civil servants, a recommendation made by most Whitehall watchers but one dismissed by Theresa May?

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Is the problem that whenever Rishi Sunak lays out clear policies, the inevitable conclusion that we may be living like this for a prolonged period becomes much harder to avoid – and that Boris Johnson is unwilling to articulate that just yet, whether to the voters, or as some Tory MPs think, to himself?

But it feels to me that the next challenge, as well as patching the holes in the policy on welfare that Anoosh outlines and doing more in general for the self-employed, is to ask if the government machine can be made to work better, and not just on the communication issues that have already been identified.