Furlough payments can now be received up until April 2021 and on top of this, Rishi Sunak has recently extended the elf-Employment Income Support Scheme (SEISS) and other forms of coronavirus themed support. While these efforts have often been commended, a new report from the PAC has criticised the government’s response.
In a report published on December 20, the PAC commended the “hard work” of HM Treasury and HM Revenue & Customs which saw financial support put in place ahead of schedule.
However, they went on to highlight certain problems the government has been consistently called out on: “The departments could have done more to widen access.
“A combination of policy decisions, limitations in the data held in the tax system and the departments’ prioritisation of implementing the schemes rapidly means that as many as 2.9 million workers may have been excluded from CJRS and SEISS.
“Despite putting the schemes in place again for the second national lockdown in the autumn, the departments have not developed their methods for determining eligibility since the first schemes to make sure that assistance gets to all those who need it.
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“They have undertaken limited evaluation of the impact of the schemes on different groups of workers, including those with protected characteristics, and little work to widen access to the schemes.
“And we are concerned that HMRC still does not know the actual level of fraud and error in the schemes and will not have a complete estimate until the end of 2021 at the earliest.
“Although there will be uncertainty as to how many people will take up these schemes over the next few months, we are similarly concerned that HM Treasury is unable to provide even a ballpark figure for the expected cost despite already extending these schemes, or explain how it will determine whether the money has been well spent.”
Within their findings, it was noted the total cost of the schemes is estimated to be £76billion but the OBR expects an additional £21billion will be added on to that.
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In concluding their report, the PAC made the following recommendations:
- HM Treasury should, within three months, write to the Committee about how it will ensure the lessons from close working between policy and operational staff are drawn-out for other government departments
- HMRC should write to the Committee within three months to explain what it has learnt from its review of other countries’ self-employed systems and how it will apply these to its plans for delivering the Making Tax Digital programme
- HM Treasury and HMRC should investigate whether more data within and outside of the tax system could be used to determine eligibility for currently excluded groups and write to the committee within six weeks to explain their findings. HM Treasury and HM Revenue and Customs should liaise with departments which have a detailed knowledge of the affected sectors in order to improve access to Covid-19 related support schemes for currently excluded groups.
- HMRC should, as soon as possible, develop and report monthly performance information on the schemes, such as take-up by protected groups and employment outcomes
- HMRC should write to the Committee within three months outlining how it can utilise the information it already collects to better estimate the levels of fraud and error; and also outline what steps it intends to take to recover CJRS and SEISS grants made during the first phase of the scheme if recipients made substantial profits or were not adversely affected by the pandemic. HMRC should list companies which have signed up to the furlough scheme by the end of January 2021
- The Departments should provide as much clarity and forewarning as possible about the employment support arrangements that will be available for UK nations, regions and businesses under conditions of national lockdown, regional lockdown and easing of restrictions for the remainder of the covid-19 pandemic. It should commit to this ahead of the Treasury minute response so employers can be clear that they can plan ahead with greater certainty
- HM Treasury should write to the Committee within a month to set out how it will assess value for money for the extended schemes
The recent extension of the furlough scheme caught the attention of several experts and organisations who welcomed the Chancellor’s efforts but warned on potential ramifications at the same time.
Sarah Hayes, an employment solicitor at Paris Smith, noted employers would likely welcome the extension for now but problems could emerge down the line: “There is criticism that extending the scheme is costly and may simply be postponing redundancies by a month.
“The Chancellor has recently stated that Britain is contending with an ‘economic emergency,’ which will be further impacted by the extension of the scheme.
“It is also highly unlikely that workplaces will have returned to normal by the end of April 2021.
“This will be particularly notable in sectors such as retail and leisure, where the impact of Covid-19 is likely to be felt for some time. Unfortunately, this means that many redundancy processes will still be inevitable and the 30 April 2021 may become a ‘cliff edge’ date for redundancies.”
Sarah concluded by examining how all this time out of work could impact employee’s prospects: “The extension of the scheme will also result in many employees being kept out of work for considerable periods of time.
“When it concludes, the furlough scheme will have been in place for over a full calendar year. For some employees that have been on furlough leave, it will be the longest period of time that they have not worked during their entire working career.
“During this timeframe, employees will have missed opportunities to develop their skill set and this may in turn hinder their career progression.
“Employees may have also lost confidence in their own abilities, as they are faced with ongoing uncertainty about their job prospects and when they will return to work.
“The full impact of this is currently unknown, but many employees are reporting mental health issues resulting in stress, anxiety and depression, which could present long-term conditions. This is likely to continue into 2021, as we slowly look towards a return to normality.”
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