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Labour Demands a Bailout for Workers

The government has confirmed that it will finally produce a support package for workers tomorrow. Labour has set out its demands: prevent layoffs, support wages, increase sick pay and boost unemployment supports.

It has been confirmed tonight that after days of delay – which have cost at least 200,000 jobs – the government will finally come forward with a support package for workers tomorrow.

Just like in public health terms, the British government’s economic response to the coronavirus pandemic has been days behind those of its European counterparts. But an intervention to protect workers is welcome, especially if rumours that it includes wage protections are borne out.

Ahead of the announcement, Labour’s Shadow Chancellor John McDonnell has produced a document entitled Wages, Welfare and Well being which lays out essential measures that must be included in any package to support workers.

Its first proposal is that jobs and wages are protected through an agreement similar to the Danish model. As we wrote on Monday, under this system “the state will cover 75% of the wages of workers threatened by job loss up to £2,800. Companies will cover the remaining 25%, while workers will give up 5 days of paid holiday time, in other words work five days for free.” In exchange for these measures, companies agreed not to layoff workers for the duration of the deal.

John McDonnell has called for a slightly adapted version of this approach, taking into account the Austrian example where lower-paid workers have been prioritised in wage protections. His document suggests all workers at risk of losing their jobs or temporarily out of work are given state wage guarantees up to 90% at a lower band, 85% at a middle band and 80% for higher earners. The precise placement of these bands is left up to negotiation with trade unions.

McDonnell’s plan suggests that, as in Denmark, companies should mirror these bands with 10, 15 and 20% contributions to workers’ wages, that there should be a cap on compensation for workers and that companies must agree not to layoff workers for the duration of the deal. Unlike Denmark, however, under his plan workers would not lose holidays or other protections as part of any agreement.

The second proposal in the McDonnell plan is for increased Statutory Sick Pay (SSP). On Saturday, Tribune called for the government to “urgently introduce a rate of sick pay that would match 35 or 40 hours of weekly work on the Real Living Wage.” Now this demand is in McDonnell’s plan – which calls for SSP to be boosted to “either 90% of average earnings or the level of the Real Living Wage.”

McDonnell’s overhaul of the SSP system would go further too – calling for the lower earnings limit to be scrapped, and sick pay to be extended to all part-time and zero-hour workers, as well as providing equivalent compensation for the self-employed. In order to meet the scale of the crisis, the document proposes that sick pay provisions are extended until the end of June at the earliest.

Then Wages, Welfare and Wellbeing turns its attention to universal credit and the welfare system, and demands substantial reform. In the short-term it calls for sanctions to be suspended, in-person interviews cancelled and the five-week delay reduced. But it also proposes that emergency payments are made non-repayable (rather than the loans in place today) and that payments such as Jobseekers’ Allowance, Employment Support Allowance and Carer’s Allowance are increased.

Although not demands, it does explore other options as well. The Benefits Cap, which we have called to be scrapped, could be suspended – along with the two-child limit and the Bedroom Tax. The Local Housing Allowance could be raised and the savings threshold for Housing Benefit either raised or scrapped.

Finally, McDonnell’s document suggests additional supports for small business, including extending cash grants, extending eligibility criteria and facilitating the urgent delivery of credit.

As we await the Chancellor’s announcement on a package to support workers tomorrow, it’s clear that Labour has put a serious proposal on the table.

Wage protections will be welcome – but they must be substantial and come with guarantees (not simply verbal commitments) about avoiding layoffs. But for many, wage guarantees won’t be enough. Already, huge number of workers are self-isolating without the sick pay they need and have been laid off because of the government’s glacial response to the crisis.

Without measures in all of these areas tomorrow, any package from the Treasury will be insufficient – and we will have to demand they return with something more comprehensive.

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