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U.K. Urged to Support Pay, Benefits to Ease Virus Shock

Johnson Urged to Support Pay, Benefits to Ease U.K. Virus Shock

(Bloomberg) --

Boris Johnson’s government should deliver a 22 billion-pound ($25.5 billion) package to help Britons facing redundancy and lost income as a result of the coronavirus crisis, a think tank said.

The Resolution Foundation said around 5 million workers from hotel and restaurant staff to travel operators and cleaners will be critically affected by the shut down now under way in an attempt to stop the virus spreading. For these individuals, working from home is less viable than for higher-paid, while-collar employees, it noted.

It urged the government to introduce a Statutory Retention Pay program to prevent mass job losses. A flat-rate scheme of 151 pounds per week for an initial six months would cost around 3.6 billion pounds if a million employees were covered, while paying staff at least two-thirds their typical salary above 151 pounds would cost around 8 billion pounds.

The proposal is based on Statutory Maternity Pay, meaning it could be delivered using established payment mechanisms. Such a system would be “significantly preferable in terms of operation and targeting” to proposals being made in the U.S. or among advocates of a universal basic income to send flat-rate payments to all households.

‘Urgent’

“Given the benefits of maintaining existing links between firms and workers, preventing lasting rises in unemployment and reducing firm costs swiftly, making such a scheme a reality is not only highly desirable but urgent,” the Resolution Foundation said in a report published Thursday.

In addition, unemployment benefits and Universal Credit, the government’s flagship welfare program, should be raised by a third to 100 pounds per week -- at a cost of 10 billion pounds a year, the research group said. Uprating other means-tested working-age benefits by 10% would cost a further 3 billion pounds.

Chancellor of the Exchequer Rishi Sunak this week pledged to do “whatever it takes” to support the country through the crisis as he announced 350 billion pounds of loan guarantees, tax cuts and grants.

“That commitment now needs to be extended to the millions of workers and their families whose livelihoods and living standards are affected by the shutdown,” said Torsten Bell, chief executive at the Resolution Foundation.

©2020 Bloomberg L.P.