This is a fast-moving issue and should be read as correct at the date of publication (25.03.20). Due to Government guidance published following the publication of this article, we are now working to update it. The content here should be read as accurate on 25.03.20. On 20 March 2020, the Chancellor announced the Coronavirus Job
On 9 October, the Chancellor announced more support for businesses that must close under lockdown regulations, as part of the new Job Support Scheme.
This comes as a new three-tier lockdown for England and a strict two-week lockdown in Scotland comes into effect.
Many MPs and mayors from the north of England have said the support is insufficient. Heads of industry are concerned about the lack of support for businesses that are open but subject to restrictions.
This Insight explains what the business restrictions are, what support will be available and Parliament’s role in scrutinising these arrangements.
There are now business closure rules in areas subject to Tier 3 (very high alert) in England and in the Central Belt in Scotland. From 16 October, there will be strict business closures in Northern Ireland as part of a temporary national lockdown.
There are also many new restrictions short of closure. Across the UK, hospitality businesses are subject to curfews. In Tier 2 (high alert) areas in England, different households cannot meet in any indoor setting. In Scotland, licensed premises that can open are only allowed to serve alcohol to be drunk outside. In sectors like performing arts and spectator sports, health and safety law means many business can only open with limited capacity, if at all.
This has led to calls on the Government to provide businesses with financial support over the winter months.
Furlough and the new Job Support Scheme
Under the Coronavirus Job Retention Scheme (CJRS), HMRC has provided grants to over one million employers to help cover the wages of furloughed employees. Today, CJRS grants cover 60% of an employee’s wages, with employers required to top up 20%. The CJRS will end on 31 October and be replaced by a new Job Support Scheme (JSS).
Under the JSS, employers can reduce an employee’s hours down to 33%. For hours not worked, the employer pays one third and HMRC pays one third. Under the Job Retention Bonus, employers will also receive £1,000 for every formerly furloughed worker they keep on until 31 January 2021. Think tanks like the Resolution Foundation and Institute for Public Policy Research have concluded that the JSS will not provide strong financial incentives to retain workers.
Support for employees of closed businesses
On 9 October, ahead of the announcement of new lockdown rules for England, the Chancellor announced an expansion of the JSS. Under the expansion, if a business is legally required to close and they instruct employees to stop working for at least one week, HMRC will provide a grant covering 67% of the employee’s wages. Employers only need to pay National Insurance and pension contributions.
The JSS expansion only covers businesses legally required to close (including restaurants, that can only open for deliveries and takeaways). It does not cover businesses that struggle to open for health and safety reasons or businesses with lower turnover because of other lockdown restrictions. This means, for example, that theatres in Scotland are covered by the scheme but not theatres in England.
The JSS only comes into effect on 1 November. Businesses currently required to close will need to rely on the CJRS if their employees are eligible.
What’s the reaction to the new scheme?
There has been a mixed response to the JSS expansion. The Confederation of British Industry said the scheme would: “cushion the blow for the most affected and keep people in work.” The Resolution Foundation said it “will go a long way towards protecting people’s incomes,” and that up to 440,000 workers might be supported.
UK Hospitality welcomed the announcement but said further support was needed for businesses operating at reduced capacity. The mayors of cities in the north of England wrote an open letter asking for higher rates of support as well as support for businesses in Tier 2 (high alert) areas that are open but seeing little activity.
On 14 October an Opposition Day Debate was used to call for more support for businesses in Tier 2 and 3 areas. However, the motion was defeated by 338 votes to 261.
What role does Parliament have?
Income support schemes like the CJRS have been governed by Treasury Directions made under the Coronavirus Act 2020. The Directions are a type of legislation that HMRC must follow but they are not subject to Parliamentary approval, meaning MPs don’t get to vote on them.
This is not to say Parliament hasn’t been vocal on these issues. The Treasury Committee, for example, published a detailed report on workers excluded from the income support schemes.
The Government has made a number of changes to the schemes, such as extending the cut-off for eligibility for the CJRS or introducing the JSS expansion.
Parliament does have a role in scrutinising the lockdown measures themselves. The Government can make lockdown legislation without prior parliamentary approval but has committed to giving MPs a vote where possible before the measures come into force.
On 13 October, MPs approved the legislation for the three-tiered restriction without a division. Further legislation will be needed, and will need to be approved by Parliament, if Tier 3 restrictions are extended to other parts of England, like Greater Manchester.
Coronavirus: the lockdown laws, House of Commons Library
Coronavirus restrictions map, House of Commons Library
Coronavirus: Impact on the labour market, House of Commons Library
Coronavirus: Support for businesses, House of Commons Library
About the author: Daniel Ferguson is a researcher at the House of Commons Library specialising in employment and equality law.
This Insight looks at how Covid-19 public health restrictions are put in place by the Government, and Parliament’s role in scrutinising those decisions.
This Library briefing paper explains the types of coronavirus restrictions and requirements imposed by the UK's lockdown laws.