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Labour says government should underwrite wages to stop coronavirus-hit firms laying off staff

Shadow Chancellor John McDonnell

5 min read

Ministers should step up their "inadequate" response to the coronavirus epidemic and underwrite wages at stricken companies so people do not lose their jobs, Labour has said.

Shadow Chancellor John McDonnell urged ministers to move to "secure people's wages, welfare, and wellbeing" as large swathes of the economy grind to a halt while the UK tries to slow the spread of the coronavirus.

The call came as as a leading anti-poverty charity said the Government should provide a major boost to statutory sick pay and increase benefit payments to lessen the economic blow dealt by orders to close down normal life.

Ministers have vowed to do "whatever it takes" to protect workers hit by the Covid-19 outbreak, with Chancellor Rishi Sunak announcing a stimulus package worth nearly £400bn - including government-backed loans and tax breaks - to help companies facing a slump in their income.

But there have been calls - including from Tory MPs and the Labour leadership challengers - for the Government to go further.

Boris Johnson on Thursday urged business to "stick by their employees" as he promised to unveil a "great package" of extra help for those affected.

In a new report on the outbreak, Labour said the country was facing an "unprecedented human, social, and economic crisis". 

And they called on the Government to pay as much as 90% of people's wages at crisis-hit firms in a bid to shore up the businesses and prevent them from laying off staff.

Under the Opposition party's proposals, workers at risk of losing their jobs or who find themselves temporarily out of work but still on a company's books would have the "bulk of their wages underwritten by the Government".

Those on the lower earner income tax band seeing 90% of their pay come from the Government, with remaining 10% paid for by firms themselves.

For middle earners, the Government would fork out 85% of a workers' wage - with 15% coming from businesses.

And for higher earners, 80% would be state-funded, with the remaining fifth paid by companies.

The plan would apply to firms considering making 20% of individual employees - or 30 in total - redundant, while the self-employed would be asked to show an actual or potential drop in 30% of their revenue in the first six months of 2020 compared to the year before in order to qualify for help.

In return, companies would give be asked to guarantee "not to lay off workers for economic reasons", with payments sent directly from the Government to employees.


The call follows drastic measures to prevent lay-offs across Europe.

Denmark has already vowed to hand state-aid worth 75% of wages to companies struggling with the impact of the coronavirus.

But Labour's proposal calls on the Government to go further, and asks asking them to avoid the Danish plan's requirement for employees to sacrifice five days' of annual leave as part of the scheme.

Mr McDonnell said: "The Government has been widely criticised, including by Conservative MPs, for being too slow in developing a plan to keep people in work.

"We have set out a package of reforms, which includes the Government underwriting the bulk of wages of people at risk of losing their job or temporarily out of work.

"This is a plan that will help secure people's wages, welfare, and wellbeing in a time of real uncertainty."

Labour meanwhile renewed its call for an "immediate" increase to the current £94.25 a week offered in statutory sick pay (SSP), saying it was "crucial that no one hesitates to self-isolate or take time off work if they believe they have the symptoms of coronavirus".


The party's demand came as the Joseph Rowntree Foundation urged the Government to do more to help Brits "weather this storm" over the coming months.

The charity called for statutory sick pay to be increased to two-thirds' of a worker's full-time earnings, with low-earning employees who currently do not qualify for the payment also brought in to the scheme.

The JRF said should the Government should also boost benefit rates for those not in work to £150 a week for single people and £260 a week for couples, with immediate access to money for new Universal Credit replacing the current five-week wait.

Helen Barnard, the JRF's head of policy and partnerships said: “All over the country, we are seeing our shared values in action as families, friends, neighbours and communities are working together to support each other through the unprecedented situation created by the coronavirus pandemic.

“The Government is doing the right thing by promising more action to support individuals, but this must be fast and the way that people access these services must work for them if they are to be effective. These recommendations demonstrate how government can achieve this, and give people the additional support they need to weather this storm.

“We urge ministers to keep up their fast action and put these measures in place immediately. We must free people who are already struggling to get by from the fear, anxiety and restrictions imposed by poverty in these uncertain times.” 

Ministers on Thursday moved to suspend all Jobcentre appointments, required to claim a host of benefits, for three months, in a bid to ease the impact on welfare claimants while guidance to stay at home is in place.

A DWP spokesman said: "People will continue to receive their benefits as normal, but all requirements to attend the jobcentre in person are suspended.

"People can still make applications for benefits online if they are eligible.

"Jobcentres remain open, and will continue to support people who are not able to use phones and online, including homeless people."

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