Prof. Keith Ewing On The Coronavirus Job Retention Scheme

Professor Keith Ewing

By K D Ewing, Institute of Employment Rights

The government’s recently announced Coronavirus Job Retention Scheme was met with widespread approval.   According to the government website, ‘all UK employers with a PAYE scheme will be able to access support to continue paying part of their employees’ salary for those that would otherwise have been laid off during this crisis’.

It is further explained that the scheme is to apply to ‘all employees who have been asked to stop working, but who are being kept on the pay roll, otherwise described as ‘furloughed workers’’.   Employers will be entitled to recover 80% of the wages of the workers covered by the scheme, up to £2,500 per month.

Although initially applauded, questions are now being asked about the scheme. Overlooked, however, is its legal base.  There is no specific statutory authority or parliamentary approval for the expenditure involved.  This is despite reports from the IFS that it will cost at least £10 billion, even if only 10% of workers are affected, and even if it lasts for only the initial three months optimistically contemplated.   More workers and extended period, greater expense.

There is an important constitutional point here.  Textbooks tell us that in the British system both the raising and spending of money by government needs to be approved by Parliament.   Approval for expenditure is done on an annual basis when departmental estimates are generally approved in advance, with unforeseen expenditure on a limited scale – and not for projects as big as this – to be met by a slush fund called the Contingencies Fund.

The statutory authority for the Coronavirus Job Retention Scheme is wafer thin, relying on an extraordinary power in the Coronavirus Act 2020 authorising any expenditure incurred by a minister, government department or public authority ‘as a result of coronavirus or coronavirus disease’.  The power is a general power unlimited as to the scale of the expenditure, and unrelated to the specific provisions of the Act.

It is, moreover, underpinned by the Contingencies Fund Act 2020 passed on the same day.  This increases the Contingencies Fund into which the government can dip its hands, from 2% to a whopping 50% of expenditure previously authorized by Parliament.    Yes, it is a time of crisis, when governments need to be indulged.  But as we know, times of crisis are when governments take powers that are never returned, and when bad practice takes root.

There are other reasons why constitutional propriety should be maintained:  this is not just about parliamentary authorisation of the funding, but also parliamentary scrutiny of the detail, which ought to have a statutory base.   The scheme – the substance of which is unpublished – applies only to ‘employees’ who have been ‘asked to stop working’, begging a number of questions that need a legislative response.

Parliament needs to be given an opportunity not only to approve and improve the scheme, but government needs also to address some of the following concerns:

  • ensure that the scheme applies not only to ‘employees’, but also at least to ‘workers’, and indeed the self-employed;
  • ensure that the scheme includes zero hours’ contract and agency workers, addressing levels of entitlement and responsibility for making claims on behalf of workers;
  • the amount of the wages guaranteed:  why have they settled on 80% up to £2,500 a month, and is this adequate?
  • the relationship between this scheme and the guaranteed payments scheme in the Employment Rights Act 1996, which provides much lower levels of support;
  • the relationship between this scheme and statutory sick pay, provision for which was amended by the Coronavirus Act but which still provides much lower levels of support;
  • the meaning of wages or pay for the purposes of the scheme – this is a complex question as litigation under the holiday pay provisions of the Working Time Regulations makes clear;
  • the application of the scheme not only to workers who are ‘furloughed’ (to repeat the revealing Treasury term apparently used in investment banks and hedge funds), but also those who are taking a hit because they have been put on short time working;
  • procedures for the resolution of disputes and the imposition of criminal penalties where employers either defraud the scheme, or do not pass on the money to their workers;
  • any amendment to or termination of the scheme by the government, and guarantee the role of the TUC and CBI in any renegotiations – to embed social dialogue which must surely continue more generally when we rebuild post-crisis.

There are other questions Parliament ought to have been given an opportunity to deal with.   Should redundancy continue to be a permissible reason for dismissal where a worker agrees to the employer going on the scheme?   Should there be mandatory information and consultation procedures with employee representatives before an employer goes on the scheme? What would be the remedy where the employer failed to inform and consult?

This ought all to have been dealt with in the Coronavirus Act, which did deal with statutory sick pay, albeit inadequately.  The closure of Parliament means that neither approval nor accountability will now be possible for an indefinite period.  The least we need from government in the meantime is more context, transparency and explanation about the Coronavirus Job Retention Scheme than is currently provided on HMG website.

Crisis or not, government directly by the Treasury is unacceptable.

For a fuller account of some of the issues raised here, see A Bogg and M Ford, ‘Legislating in Times of Crisis: The Coronavirus Job Retention Scheme’, UK Labour Law Blog, 23rd March 2020, available at https://wordpress.com/view/uklabourlawblog.com).

This blog is an updated version to the article which appeared in the Morning Star on 26th March.

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