When the protection schemes end: a transition package to help households recover from the coronavirus shock
The government’s interventions have gone a long way to protect people’s incomes and give them options to limit their expenditures during this crisis. In some instances, these measures have not gone far enough, but for most people they are providing some much needed security during the initial phase of this pandemic.
However, these measures are temporary and many households’ finances will be exposed if and when they end. At Citizens Advice, we see millions of people with many different kinds of problems, giving us a unique insight into the protections people are likely to need when that point comes. This paper sets out options for a transitional package of support after the initial measures end.
Summary of recommendations
To help households manage as temporary interventions come to an end, we recommend the government implement a transitional package of support with five parts:
A gradual end to the job retention scheme, rather than turning it off at once. This could, as we suggest below, include ending it on a sectoral basis or introducing more flexibility into the existing system, to allow employers to partly furlough employees. An equivalent approach should be taken for the income support scheme.
A recognition that not all household and financial debts accrued during this period will be paid according to existing schedules. This may require further extension to existing mortgage and debt holidays, and continued access to these for some people. Further forms of debt relief may be needed to ensure people do not lose their homes or become insolvent through no fault of their own.
Further enhancements of Universal Credit and other benefits. In normal times, Universal Credit exists both to provide a safety net and ensure people have incentives to re-enter the labour market. But if we are entering a protracted period of social distancing and limited demand for labour, the latter may be less important than the former - and increases should be made as a result.
A Coronavirus Financial Hardship Fund. This fund would have a different purpose to Universal Credit, which is intended to provide a minimum income to cover essential costs. Instead, it would help people facing particularly significant income shocks and unavoidable outgoings, which take time to adjust to in this context. Applications to this fund would be granted for people whose incomes had been negatively affected by the crisis, such that they can no longer afford to meet their necessary outgoings. Payments could be made as either a grant or a loan depending on applicants’ financial circumstances.
Specific protections for the 1.5 million people in the shielded group, who may have to remain in their homes longer, and be asked to do so again if and when a second peak in the epidemic happens. There is already a need for a change to the Job Retention Scheme to make clear that this group should not be expected to work. Income protection schemes, payment holidays and eviction pauses may need to persist for this group for longer than everybody else.