Test and trace: paying the £500 to all workers who need it will show society’s support for those must self-isolate
The Test and Trace support payment should cease to be means-tested so as to reach all who need it.
This is the second part of a two-part blog that looks at what is would take to repair the UK Government’s Test and Trace Support Payment scheme so that it actually reaches the workers in low income households who need financial support while they self-isolate. The one-off £500 payment is available to people employed or self-employed who have either tested positive themselves or have come into contact with someone who has. To qualify, they must be unable to work from home, liable to lose earnings during self-isolation and be part of a household that has a low income.
The first part of this blog showed that at present, the scheme only reaches a quarter of those who actually need support – where ‘need’ is defined by entitlement to Universal Credit (UC) but measured it in practice by receipt of UC (or the older benefits which it replaces). Although about 1 in 8 workers are in households receiving UC at the moment, we estimate that half of all workers would be entitled to UC if their earnings stopped. The scheme does have a discretionary element but it is way too small and was overwhelmed within weeks.
However, establishing entitlement to UC is time-consuming, both for the claimant and for the local authority assessing the claim. This scheme, addressing an emergency, needs to be able to confirm that support will be available rapidly. That is not possible if anything like a new claim has to be made. Yet pulling back to “receipt of UC”, as the current scheme does, misses most of those who need support.
Our solution is simple: drop the means-test and make support available to any worker who has to self-isolate, so long as they cannot work from home and will lose earnings while they self-isolate.
The main argument in favour of this approach is that the priority in the present situation is to ensure that everyone who ought to self-isolate does self-isolate. The question of whether a state-provided benefit or service like this should be subject to a test of financial means can be argued for every element of the welfare state. In general terms, the more it is in society’s interest that everyone should take up a particular benefit, the stronger is the argument for providing that benefit irrespective of financial means.
With Covid, where an infected person may suffer mild or even no symptoms at all, this argument is reinforced by the fact that the individual’s private interest in self-isolating may be very weak. It is easy to understand why someone who is young, fit, short of money and maybe not that worried might not bother self-isolating, even if not doing so risks a fine.
The argument against extending support irrespective of financial means is the cost. There are two things to say on that. First, the cost that matters here is not the gross cost (the money paid out in support) but the net cost, after deducting spending elsewhere that has been avoided as a result of the scheme. We have not estimated this but we would expect some savings in the NHS (as more people self-isolate, so the spread of the infection is slowed). There could also be wider benefit if more self-isolation now allows a faster return towards normal later.
Second, the gross cost of our revised scheme includes the additional, or “deadweight” cost of providing the benefit to all who are required to self-isolate and cannot work from home, not just those who have a low income. As the first part of the blog explained, although half of all workers would be entitled to UC if their earnings suddenly stopped, more like two thirds of workers who cannot work from home have below average earnings. Since the support is taxable, those with higher earnings will pay more of it back. Higher paid workers are more likely to go on being paid while they self-isolate. Taking all these factors into account, we estimate that the deadweight cost adds 50% to the cost of supporting the low-income workers who would be entitled to claim UC if there were time to go through the full process.
We estimate that for every 100 confirmed cases, 65 low-income workers would be entitled to support. As the technical note below explains, this estimate takes account of: the mix of cases between children, working-age and pensioners; the number of contacts who would have to self-isolate; the working-age employment rate; the proportion who cannot work from home.
Support at £500 per person implies that 1,000 cases represents a one-off cost to the support scheme of £325,000 without the deadweight cost, or around £490,000 with it. Figure 1 shows how much would have been paid out in each full week since the scheme began at the end of September. Over the first 11 weeks, the weekly cost varies between £49m and £83m. As case number start to rocket at the end of the year, the cost rises to £119m in the week to Christmas Day and over £156m in the last week to New Year’s Day.
Figure 1: projected gross (including deadweight) weekly and cumulative cost (£m) of a revised support scheme: (based on reported cases, UK, 3 January 21)
The cumulative spend by year end reaches £1bn. In the circumstances, this is not a large sum. Of course, it is now going to grow rapidly, double this by early February unless new case numbers start to come down. But the government has committed nearly £70 billion (including £24 billion since July) to support public services through the pandemic thus far.
Three days before Christmas, the House of Commons Library published a report on the “Eat Out to Help Out Scheme”. When that scheme was announced, the Treasury had estimated it would cost £500m. When the final bill came it, it had reached £840m. As it happens, that is what the gross cost of this revised scheme would have been over the whole 12-week period to Christmas Day.
Set against this, the £40m that the Government allocated to English local authorities for the scheme (along with a further £10m to support its administration) is an incomprehensibly small sum. Adjusting the numbers in figure 1 down to England and excluding the deadweight cost, £40m was still not enough for two weeks. The £25m within it for those already in receipt of UC would have been enough for three weeks.
We cannot say what difference it would have made if the scheme had been designed from the outset to reach as many of those who needed financial support to self-isolate as possible. But at this critical moment, that does not matter because one thing the Government is not short of is money. It should announce that £500 will be paid to all workers, irrespective of their income, who have been told to self-isolate, cannot work from home and would lose money as a result. It should give local authorities in England and the devolved governments in Wales, Scotland and Northern Ireland the money they need to do this.
Revamping the system like this would also be an opportunity to renew the drive to promote compliance with self-isolation. Explaining why people have to self-isolate can never be done enough. Backing that message up with what, for someone who cannot work from home and so will lose money, can be a near-promise that £500 is available, will help psychologically as well as materially. The £500 will also ease the job of contact tracers who, as they administer the bitter pill of self-isolation, will have something positive and supportive to offer.
A technical note on the workings from both this and the first part of the blog can be downloaded here: