Quantcast

Government to pay 80 percent of wages for employees out of work because of coronavirus

Andy Bassett

Standard Member
Staff member
The latest daily press conference regarding the government's response to the coronavirus crisis has revealed plans for it to pay 80 percent of wages for employees who are not working, up to £2.500 a month.


That's quite a commitment - what do members think of this move?
 
Last edited by a moderator:

tigermad

Distinguished Member
The latest daily press conference regarding the government's response to the coronavirus crisis has revealed plans for it to pay 80 percent of wages for employees who are not working, up to £2.500 a month.


That's quite a commitment - what do members this of this move?
I’m not sure what that means. Is that for people that work in pubs and clubs etc who won’t be working? Or people who are sick?
 

Barrovian

Well-known Member
I'm trying to work out what it means for 'vulnerable' people. My niece is pregnant and according to advice is classed as vulnerable and the advice seems to be that she should be staying away from work, practicing social distancing, staying at home etc for the next four months. She can't work from home (she's a cleaner) Her employer has told her that if she follows govt advice, she won't be paid. So like thousands of others, she is having to go to work as she can't afford not to. Anyone else in a similar position? And if so, what are you doing?
 

69COU

Active Member
As I have read this if employer normally pays employee £2500 gross per month Employer pay employee wage it cost employer extra £245 of employer NI. Thus cost to employer is £2745. (Employer gets 2500x80% thus £2000.) So net cost to employer to keep employee on payroll is £745 for that month even if employee is at home so effectively business is in semi shutdown.

Employee needs to pay £291 tax and £213 employee NI. Thus £504 deductions. Net wage = £1996. Real cost to government = £2000 - (745+504) = £751 about the same as employer.

Thus employee who then spends net wage let’s assume all on VAT chargeable items means approx a further £400 back to government. So then net cost £351.

However If my assumptions are correct cost to taxpayer is not much different to Jobseeker’s Allowance of about £75 per week 4 = £300 on which only £60 recovered in VAT however in this situation government probably needing to fund council tax circa £200 or other universal credit costs so probably ends up costing more. In first calculations above I have not put council tax as a rebate to government as assume shared between typical two members of household. As can be seen this is all very complicated.

All the above needs to be understood to understand if the little mentioned for self employed or non PAYE in main contractors may end up similar.
 
Last edited:

unique

Moderator
As I have read this if employer normally pays employee £2500 gross per month Employer pay employee wage it cost employer extra £245 of employer NI. Thus cost to employer is £2745. (Employer gets 2500x80% thus £2000.) So net cost to employer to keep employee on payroll is £745 for that month even if employee is at home so effectively business is in semi shutdown.

Employee needs to pay £291 tax and £213 employee NI. Thus £504 deductions. Net wage = £1996. Real cost to government = £2000 - (745+504) = £751 about the same as employer.

Thus employee who then spends net wage let’s assume all on VAT chargeable items means approx a further £400 back to government. So then net cost £351.

However If my assumptions are correct cost to taxpayer is not much different to Jobseeker’s Allowance of about £75 per week 4 = £300 on which only £60 recovered in VAT however in this situation government probably needing to fund council tax circa £200 or other universal credit costs so probably ends up costing more. In first calculations above I have not put council tax as a rebate to government as assume shared between typical two members of household. As can be seen this is all very complicated.

All the above needs to be understood to understand if the little mentioned for self employed or non PAYE in main contractors may end up similar.
you haven't taken into consideration pension contributions, such as NEST, student loans, wage arrestsments, council tax, mortgage, rent, gas, electricity, insurance, tv license, mobile phone, broadbank, sky/virgin, etc and other costs most people will have, some of which won't incur VAT. not everyone will have their full take home pay to spend on VATable items, and will spend it on VATable items. after initial bills, food costs for someone on your example wage are likely to be next, and not all food is VATable. so take the mortgage/rent/bills off the real take home pay after pension contributions and everything else, and the available funds to spend are likely to be closer to half the take home pay for someone in that salary band, probably less in most cases if people have signed up to typical bills like mobile/broadband/tv/netflix etc etc. many people will have things like loans for cars or other things and available spend is even less

you also don't take into considseration the fact that the government/councils would normally be relying on the aforementioned receipt of taxes etc as the income that goes towards funding the goverments spending. so the government is paying out without getting it back in

so if the government is spending all this money on covering wages and everything else, where is the magic money tree to pay for this?
 
D

Deleted member 297713

Guest
I am not an accountant, Why do I get the feeling that we have sold our children and grandchildren into slavery?
 

69COU

Active Member
you haven't taken into consideration pension contributions, such as NEST, student loans, wage arrestsments, council tax, mortgage, rent, gas, electricity, insurance, tv license, mobile phone, broadbank, sky/virgin, etc and other costs most people will have, some of which won't incur VAT. not everyone will have their full take home pay to spend on VATable items, and will spend it on VATable items. after initial bills, food costs for someone on your example wage are likely to be next, and not all food is VATable. so take the mortgage/rent/bills off the real take home pay after pension contributions and everything else, and the available funds to spend are likely to be closer to half the take home pay for someone in that salary band, probably less in most cases if people have signed up to typical bills like mobile/broadband/tv/netflix etc etc. many people will have things like loans for cars or other things and available spend is even less

you also don't take into considseration the fact that the government/councils would normally be relying on the aforementioned receipt of taxes etc as the income that goes towards funding the goverments spending. so the government is paying out without getting it back in

so if the government is spending all this money on covering wages and everything else, where is the magic money tree to pay for this?
It was a deliberate simplification to try and show first principles. However the simple answer to the money tree question is the QE that has been announced. They are printing £250bn of money.

Lets put that in simple digits £250,000,000,000. Population = 70,000,000. Equivalent to £40,000 ish per person. It cannot be taxed back too much!

To get a real feel on this overlay with time so every £1 printed took 5 seconds. Now work back in time and let us know what year you are in.
£720 takes you back an hour
£17,280 takes you back a day
£129,960 takes you back a week
£6,209,290 take you back a year
80Years so WW2 £503,193,600 ——-World War 2
473 years = £2,975,132,160 ——-Henry IV died
954 years =£6,000,583,680 —— William the Conqueror
2,020Year =£12,705,638,400—-Jesus Christ

£250,000,000,000 at £6,289,920 a year takes you back 39,746 years when you started printing made up money at £1 every 5 seconds.

Rewind to 30,000 years ago. As well as modern humans, three other hominin species were around: the Neanderthals in Europe and western Asia, the Denisovans in Asia, and the "hobbits" from the Indonesian island of Flores.

Total Uk debt was already at £1,821,300,000,000 at the end of the financial year ending March 2019. UK debt ONS

Add together with this printed money and it’s a long long time.

Good Question who is it owed to? Now ask the same of every country debt in the west? Then check every countries debt in the East. You will never get an answer of who is actually owed the money.

Eventually you will be told future generations. I think even the game of we are borrowing off the next generations is well and truly bust. Reality governments can issue 100yr debt at areally silly low rate now. Negative yielding shorter term government debt is already in play. The reality is will just print money in future to allow is repayment.
 
Last edited:

Abayomi

Active Member
Good Question who is it owed to? Now ask the same of every country debt in the west? Then check every countries debt in the East. You will never get an answer of who is actually owed the money.


The debt is held by various countries and private enterprises that purchase that country Government bonds. For example I believe that China ownsome 35% of USA's debt, Hence Trump's early in office threat that if China called in or dumped US debt then he would default. A risky move

Argentina defaulted on debt repayments and refused for a number of years to demands by certain debt holders to pay up ,a consortium of hedge funds and such like, Argentina were taken to World Bank where a judgement was made against them and they were ordered to pay up. Argentina's defence was based along the lines of "A sovereign nation is defending it's citizens and does not have succumb or honor demands made by a private enterprise effectively imposing financial restraints upon a Sovereign nations citizens to obtain monies to them. did not wash they actually paid up and had to impose austerity measures. In the main Sovereign States would not call in debt but would have reciprocal write offs It's privately held Sovereign debt which is at risk from such actions and usually a deal is struck


As for the UK government paying the wages/salary of Self-employed and PAYE employees. A Simple analysis is In general workplaces have been shut down by request of the state to protect its ctizens . In response the State cannot let it's people starve so a financial rescue package has to be put in place. In reality the significant threat is if people have no means of suitable financial support civil unrest will quickly spread leading to extremley stringent measures and the Army on the Streets. This obvously must not happen. Money will be printed and economies rest to a new normal, generate inflation as well to ease the debt burden The never-never is the new economic norm
 
Last edited:
Top Bottom