One of the nation’s biggest unions has urged ministers to follow the lead of other European nations and introduce a wage guarantee scheme to help workers and businesses weather the Covid-19 crisis, highlighting Department for Work and Pensions data on precarious personal finances.
The GMB said the DWP-backed Money and Pension Service report released in January this year showed that 11.5m people had less than £100 in savings to fall back on, adding that 9m people often used credit to pay for food or essential bills – a further sign of hand-to-mouth finances.
The union, which is the nation’s third-largest and covers a range of public sector roles – including some civil servants – added its voice to calls for government level intervention to support people to keep their jobs and stop family finances being sent “to the wall”.
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This week former prime minister Gordon Brown, former Labour Party leader Ed Miliband, and would-be Labour leader Rebecca Long-Bailey have separately called for some form of wage guarantee as part of the nation’s Covid-19 response. Think-tank the Resolution Foundation also proposed the introduction of “statutory retention pay” which it said would allow employees to keep their jobs via government subsidy, even if they had no work to do.
On Wednesday, prime minister Boris Johnson agreed to meet opposition leaders to discuss ways the state could aid individuals through the economic impacts of the coronavirus crisis, with the concept of a “universal basic income” set to be one area for exploration. Further announcements are expected by today.
The GMB pointed to measures in Sweden, Germany and Austria, where governments are sharing wage bills with employers, allowing workers to keep 90% of their wages.
It said Norway was guaranteeing the self-employed 80% of recent income; France had promised workers free rent or mortgages, free gas and electricity, and pledged that no company would go under; while Denmark was paying 75% of the wages of employees, up to a maximum of around £30,000 a year.
GMB general secretary Tim Roache said a “people’s bailout” was required and that unless the government intervened urgently, it risked turning a public health crisis into a new personal-debt crisis.
“Huge numbers of people were covering basic living costs on credit even before this crisis struck. Suddenly finding income dry up is already pushing people to the financial brink,” he said.
“Ministers need to guarantee wages and suspend rent and mortgage payments – not just roll them over to be paid later. This is crucial for living standards and people’s mental health now, but also for the hope of economic recovery later.
“We are going to need people to spend in their local areas – and if they’re paying off mountains of accumulated debt, they just won’t be able to do that.”
The Resolution Foundation, which focuses on improving the lives of people on low-to-middle incomes, said that unlike the 2008 financial crisis, people in lower-paid jobs were likely to be the first economic casualties of the Covid-19 crisis.
It said typical weekly pay in the sectors most affected by Covid-19 was £320, compared to £455 for the wider economy. The think-tank added that the need for self-isolation and remote working posed additional problems because fewer than one-in-10 of the bottom 50% of earners were able to work from home.
The foundation acknowledged this week’s £350bn package of financial support for the nation’s businesses unveiled by chancellor Rishi Sunak, but said “bolder steps” to support family incomes were now needed.
Its statutory retention pay scheme aims to keep people who don’t have any work to do on their company’s payroll with a “significant amount” of their pay covered by the state.
“Firms would continue to pay workers at least two-thirds of their previous wages via their payroll, with the state providing a rebate for those payments at a cost of £4bn for an initial six months if 500,000 employees were involved, and £8bn if a million were,” it said.
“A simpler flat-rate payment of £151 per week would cost £3.6bn if 1m workers were involved.”
The Resolution Foundation’s full suite of proposals can be found in the Doing What It Takes report, published on 19 March.