The impact of coronavirus on businesses and workers

We commend the Government for moving quickly at the start of the pandemic to implement novel and wide-ranging financial support schemes. We welcome these measures, which have delivered unprecedented levels of financial support to individuals and have shielded vast numbers from the potentially devastating economic impact of the pandemic.

Whilst we welcome the overall level of support offered, we are disappointed that the Government has repeatedly chosen not to adapt and refine its support to address identified gaps in coverage. It is unacceptable that 11 months into the pandemic approximately 3 million people have fallen through the cracks. Mothers being discriminated against by virtue of having taken parental leave in the last three years is a particularly egregious example of the failure to refine support. We agree with the Treasury Committee (in its Eleventh Report, Economic impact of coronavirus: gaps in support and economic analysis) that the Government’s approach to employees and self-employed people has in practice been inconsistent, unfair and discriminatory.

The Committee accepts that there are some groups who have been at a comparative disadvantage, such as those remunerated by dividends. The Government has cited administrative difficulties and the risk of fraud. The Government should consider solutions put forward on how income from dividends can be distinguished from unearned income from dividends.

We welcome that many individuals who have not been able to access furlough or SEISS will have had support through Universal Credit, discretionary grants from local authorities, and mortgage and consumer credit holidays. However, we are disappointed by the Government’s suggestion that these are a sufficient replacement for individuals unable to access furlough or SEISS support. The repeated use of the risk of fraud as an adequate justification for not addressing gaps in support for workers is also unconvincing.

We are also concerned that gaps in support appear to have fallen disproportionately on particular sectors, such as the creative industries. Further Government action is required to support those sectors of the economy.

We recommend that the Government reviews the coverage of current support to make sure that the greatest support is provided to those individuals facing most hardship, and that any gaps in provision are addressed. We expect the Chancellor to announce measures to this effect in his Budget statement next week.

We appreciate that not every job can be saved as the Chancellor has set out, but are nonetheless concerned about rising unemployment, which is particularly affecting women, BAME workers and young people because they are more likely to be employed in insecure work. We are concerned that damage may be done to some sectors by the premature withdrawal of furlough and the Self-Employment Income Support Scheme, which would hamper the UK’s ability to recover quickly with a focus on good quality work. (Paragraph 30) 22 The impact of Coronavirus on businesses and workers: interim pre-Budget report

We recommend the Government urgently produces an economic assessment which sets out the opportunities and risks posed by structural long-term changes to the economy from the combined impacts of COVID-19, Brexit, and the net zero transition. We welcome the publication of the Skills for Jobs White Paper, and the Government should continue to build a comprehensive, long-term cross-departmental plan on education, skills and jobs to create good quality employment opportunities for the future.

This plan should form part of the Industrial Strategy to ensure our educational institutions, key business sectors, the workforce and broader economy are strategically geared towards achieving long-term goals such as the net zero transition, our aging society and the technological modernisation of our economy. We recommend that the Government provide a detailed outline of their approach in its response to this report. (Paragraph 32) Support for businesses

We welcome the sheer scale of financial support the Government has provided to businesses since March 2020. For many businesses, this support has allowed them to stay afloat during the pandemic. We also welcome the Business Rates Review announced in the March 2020 Budget to help business in the coming years. Whilst some sectors have understandably received targeted support and not every individual circumstance can be catered to, we recommend that the Government considers further tailored support for sectors heavily affected by the pandemic.

We are particularly concerned for ‘bricks-and-mortar’ retail which is unable to compensate for physical closure, as well as businesses such as those in the ‘live events’ industry which, though not legally forced to cease operations, have seen a collapse in business due to health restrictions. The lack of targeted support for these businesses is exacerbating the divide between those which have had to close, and those which have not. We are also concerned that the lack of a targeted approach may be resulting in the perverse situation of the taxpayer inadvertently propping up large businesses which have done well during the pandemic.

We recommend that if the Government returns to any form of tiered system or localised lockdowns, that financial support for business should reflect that.

We expect the Government to respond to the pandemic with more nuanced and targeted policies in future, and recommend that the Government uses the Budget to review the support it has offered to businesses and announce more targeted support aimed at the sectors most in need.

We have previously called on the Government to attach conditions to the use of taxpayer-funded support and are disappointed that, on each occasion measures have been extended, the Government has failed to do this. We recommend that the Government reviews what enforcement powers it has to ‘claw back’ support where appropriate, and what additional checks or conditions could be applied to support for businesses in order to reduce instances of fraud, and to sanction businesses which have accessed public funds in bad faith. (Paragraph 45) The impact of Coronavirus on businesses and workers: interim pre-Budget report 23

With the moratorium on commercial rent obligations due to expire soon, the Government does not appear to be any closer to identifying or facilitating a long- term solution to the difficulties faced by landlords and commercial tenants. While many landlords and tenants have been able to come to an accommodation, we are unconvinced that landlords and businesses will be able to identify a solution on their own in every case.

The Government should use the time afforded by current time-limited support measures wisely to identify long-term solutions. The Government should consider active measures to address the issue of growing commercial rent arrears, and proactively work with businesses, landlords, banks and other stakeholders to identify an appropriate long-term solution. (Paragraph 51) Moving forward

Throughout the pandemic the Government has attached expiry dates to support measures, which have since been found to be premature. In most cases, the measures have ultimately ended up being extended, which is undoubtedly the correct decision. In the early months of the pandemic, it was difficult to know long health measures would need to last. This has been further complicated by the discovery of new variants of the disease which appear to be significantly more infectious. However, the situation we find ourselves in is no longer novel. By continually failing to take a long-view, particularly now that we understand that health restrictions (and therefore business support) will be necessary for as long as the virus is prevalent, needless long-term damage is done to the economy and workers through repeated ‘cliff edges’, which ultimately turn out to be artificial.

As of mid-February, with weeks to go before many support measures expire, the Government has not yet set out which measures will be extended. We understand that the specific course of the pandemic is inherently uncertain, and new restrictions may be introduced at short notice. We hope that the Government will provide businesses and workers with the broad assurances of ongoing support, particularly now that the Government has a range of established measures it can adapt quickly in response to changing circumstances.

As more of the population is vaccinated, the Government must shift its policy- making approach from reacting to rapidly changing circumstances towards long-term considerations. In his Budget, the Chancellor must give businesses and workers the security and certainty they need by extending the existing package of measures and committing to phasing them out only when the easing of health restrictions allows. To address the issue of debt affordability for businesses, the Government should also consider whether converting certain existing businesses’ COVID loan debt into grants, could provide an appropriate long-term solution. We also recommend that the Government sets out a clear strategy for business recovery, which addresses the challenges faced by many sectors which will not be able to re-open as early as others.

We welcome the strong level of engagement between the Government and business in the early months of the pandemic. The Government must be as open with the business sector as possible, particularly by providing reasonable notice and 24 The impact of Coronavirus on businesses and workers: interim pre-Budget report detail of impending changes to health and business restrictions, and working as constructively as it did in spring and summer 2020 to develop comprehensive and practical guidance on how businesses should adapt to changing health measures. We recommend that the Government proactively engages with businesses and trade union leaders on an on-going basis, to ensure feedback is built into Government policy-making as we recover from the economic consequences of the pandemic. (Paragraph 69) The impact of Coronavirus on businesses and workers: interim pre-Budget report 25