Coronavirus: Job-Support Schemes

Mel Stride Excerpts

Tuesday 7th July 2020 Commons Chamber

[Mel Stride (Central Devon) (Con)]

May I begin by thanking the Backbench Business Committee for allocating time for this important debate? I say that it is an important debate because, of course, Her Majesty’s Revenue and Customs is seeking an additional £52 billion as part of the main estimates, those being attributable to the principal job support measures that the Government have brought forward—about £42 billion for the furlough scheme and a further £10 billion for the self-employed income support scheme. Those are vast sums. Even as a proportion of the entire amount that the Government are spending to support businesses and individuals and the economy during this period, those are very sizeable sums indeed. As we know, the amount that has gone into supporting those on furlough is around the equivalent, on an annualised basis, of the day-to-day spending of our national health service.

I think that, in the round, the Chancellor should be applauded for having come out with these measures to support the economy, individuals and businesses, and for both the scale of what he and the Government have delivered and the pace with which it has been delivered. It is important for me to express on the record my satisfaction with both those points.

However, when we come forward with measures of that scale and at that pace, it is almost inevitable that there will be hard edges to policy and, indeed, gaps through which people fall. There are people whom one would normally want to have support who have not yet received that support. That has been the focus of the considerable amount of work that the Treasury Committee has undertaken, with 12 inquiry sessions and a first call for evidence that received a near-record 16,000 responses from self-employed people and those working in businesses up and down the land who are very concerned about these gaps in provision.

I shall focus briefly on two groups in particular. The first is those who are self-employed and choose to work through a limited liability company, paying themselves both by way of pay-as-you-earn income and through dividends received through that company. The problem arises when it comes to calculating the furlough entitlement for those individuals: it is based solely on their PAYE income and does not take into account in any way the income, albeit self-employment income, that they receive by way of dividend.

Of course, when we had the head of HMRC before our Committee, we asked him about that. I have to say that Jim Harra is a very capable head of HMRC; I worked with Jim when I had strategic responsibility for HMRC as a Minister at the Treasury some time ago, and he is a very capable man. However, he did not give the answer that the Committee wanted to hear on that occasion. He did not allude to the problem being anything to do with the expense involved; he talked about the administrative difficulties of differentiating between income received by self-employed people by way of dividend and other income received by way of dividend, perhaps in respect of passive investments, for example.

I recognise that there is a complication there. However, the question has to be: is it an insurmountable complication? Our Committee’s investigations suggest that it is not. HMRC could adopt an approach of basically paying out on the furlough scheme, having a clawback arrangement in place in the event that mistakes are made, and perhaps having a penalty regime alongside that, first to discourage erroneous claims and secondly to help fund the activity involved in policing those arrangements.

The reality is that we estimate that there are some 700,000 people in that situation who, for the last four months, have not had the support, or the full level of support, that many millions of others up and down the country have received. That cannot be right. It cannot be right because the Government, when they set out their strategy to resolve and tackle the crisis, stated that right at the heart of their mission would be fairness towards individuals and groups. I do not believe that that has been demonstrated in the case of the 700,000 individuals who are not getting the support that they should be.

The second group are the new starters: those who took up employment typically around March this year. There was originally a deadline or cut-off point of 28 February for the receipt of furlough—people had to have been employed prior to that date. That was then shifted, for which the Committee was duly grateful, to 19 March. Yet there will still be many individuals who joined businesses before 19 March but, because there was not an electronic communication regarding that employment between the employer and HMRC prior to 19 March, they do not qualify for furlough support. The Committee believes the Government should look more closely at that. Our recommendation in that respect has been to push the date back to the end of March.

There are a number of other categories of employed and self-employed, such as freelancers, those on short-term contracts and many others, who are not receiving the support we believe they should be entitled to. If we total all of them up, our estimate is that certainly more than 1 million people are falling through the gaps. There are others who estimate that figure to be nearer 2 million or 3 million people.

[Steve Brine (Winchester) (Con)]

As ever, I am listening very carefully to my right hon. Friend. I have followed the work of his Committee and the very sound things he has said on this matter. He alluded to this, but the heart of this issue, whether it relates to people who are new to self-employment, new to employment or take the majority of their employment through dividends from limited companies, is that we made the bad the enemy of the good. The vast majority in this space who missed out on help were not trying anything on; they were just doing their thing as entrepreneurs in the British economy and were then left out. What we should have done was get help to them to do whatever it takes. HMRC, as we both know, is not averse to taking back what it thinks has been wrongly taken. We really should have got help out there and then claimed it back if needed. Does he agree that the two schemes fell down on the universality of doing whatever it takes?

[Mel Stride]

I thank my hon. Friend for his intervention and I think he is entirely right. It is simply the case that those who choose to take their income through limited companies by way of dividend are operating entirely within the rules. I do not think there is anybody, HMRC included, who would dispute that, and that lies at the heart of why they should be treated fairly.

Perhaps I could just address two further points in relation to the Government support schemes and ask the Minister if he could comment on them in his wind-up. The first relates to lockdowns. One has already occurred in Leicester, but there may be further lockdowns, unfortunately, across the country. They will be localised, and it is very sensible that they should occur. Undoubtedly, however, they will impose very considerable further economic and social hardship on communities. I have written to my right hon. Friend the Chancellor to ask him what measures he may be considering bringing forward to provide further assistance to those communities in those circumstances. It occurs to me, for example, that the Minister might like to comment on the specific suggestion that businesses in such an area might have more flexible access to the furloughing of staff and be freed from some of the current restrictions in that respect. I would be interested in my right hon. Friend the Financial Secretary’s comments on that.

Secondly, in Treasury questions this morning a number of Members asked whether there would be some kind of targeted support when the wholesale nature of the support schemes ends at the end of October. I think the Chancellor is signalling that he is quite resistant to that. I would want to push back on that and say that we should keep our powder dry and wait and see. The Chancellor rightly said that people talk about sectors but often do not explain exactly which sectors. Part of the reason for that is that it is not clear at this stage, because things are unfolding in such an uncertain manner and it is not absolutely clear where the different parts of the economy will be in autumn. However, I think it only prudent that the Treasury keeps a very close eye on the sectors that are still damaged and inhibited as a result of social distancing, but, critically, still have the ability to grow and thrive once we come through the crisis.

That is the kind of business where I think some targeting of these schemes would be appropriate.

I notice from the clock that I have reached 10 minutes, Mr Deputy Speaker, so in line with your earlier exhortation, I will conclude. I thank the Backbench Business Committee for giving us this opportunity. I ask the Minister please to look closely at the gaps that the Committee has identified. Finally, I wish the Treasury well in the enormously important and difficult decisions that it will have to take in the weeks and months that follow.

--- Later in debate ---

[Mr Steve Baker (Wycombe) (Con)]

I begin by referring Members to my declared shareholding in Glint Pay. I thank HMRC for what it has done to put these schemes in place. It is the most extraordinary achievement that it has managed to put in place the coronavirus job retention scheme and the self-employment income support scheme. Normally, such things would take months and years and often be marred by IT failures and delays, and yet HMRC staff have successfully delivered this. I would far rather that they had successfully delivered than failed and left everyone without support. It is the most tremendous achievement, and the staff involved deserve our praise for what they have done, but I think we can see why it normally takes months and possibly years to deliver such schemes, because that time is required to deal with what have become hard edges.

Before I go any further, I would like to put into context the scale of the spending that we are talking about. If we look at page 355 of the estimates, there is £52 billion listed for covid-19. When I look up and down the detailed entries for the Department for Work and Pensions, I can see only one sum that is higher than the covid provisions for HMRC. Rounding to the nearest billion, the figures listed are £33 billion for universal credit inside the welfare cap, £13 billion for personal independence payments, £17 billion for housing benefit inside the welfare cap, just £5 billion for universal credit outside the welfare cap and £102 billion for the state pension outside the welfare cap. To see £52 billion appear in the estimates for HMRC is quite extraordinary, and I will return to that figure in my concluding remarks.

[Mel Stride]

My hon. Friend is making an extremely important point. These are just the main estimates, not the supplementary estimates, and the schemes have been extended and modified since those figures were put together. Does he agree that it would be useful to hear from the Minister what additional funds might be sought through the supplementary estimates?

[Mr Baker]

Yes. I hope that the Minister will give us a detailed explanation of how these figures break down, because the figure to which I just referred is different from the one on the Order Paper. I refer Members to page 357 for the resource to cash reconciliation, which I am sure my right hon. Friend will be fully able to break down in detail if he wishes to.

I want to come on to some of the things that the Chair of the Public Accounts Committee said. In my constituency, there are plenty of people who, in one way or another, work in the arts and are in quite desperate straits. To reinforce her point about tronc, it has been a real disappointment to me that we have not dealt with the issue of people in the hospitality sector receiving perhaps half their income through tips, for which HMRC has PAYE information. I will never forget one particular email from a new father who was shocked to discover that he would be not on 80% of his normal pay but 40%. That is a dramatic difference, and it is because HMRC and the Government have not taken into account tronc payments, which they should. The freelancers issue is important and profound. On dividends and directors, we should recognise that sometimes we are talking about make-up artists, for example, who are paid through dividends.

--- Later in debate ---

[Mel Stride]

I will be brief, Madam Deputy Speaker, because I realise that there is another debate to follow. I think that we largely agree across the House about what is working and the fact that the Government have come out with a major programme at considerable pace, which has been laudable. However, that is not the same as saying that everything is perfect or that it cannot be fixed. It seems to me that the Government and the Chancellor have in the past taken an iterative approach to some of these schemes, as the Minister has just been setting out, and our question will be: why can he not take an iterative approach to some of the gaps?

When the head of HMRC appeared before the Treasury Committee, he used an expression to the effect that HMRC has discovered in this process of rolling out these programmes that it has been capable of doing things that it did not think it was capable of doing. I say to HMRC and the Government: let us have that same approach adopted now in respect of the gaps, and let us look after and support those million-plus hard-working people up and down the country who are worthy of it.

Question deferred until Thursday 9 July at Five o’clock (Standing Order No. 54).