Missing in action: what’s wrong with the “test and trace support payment scheme” and how to fix it
The UK Government’s Test and Trace Support Payment scheme, ought to be a major weapon in the fight to keep Covid under control while we wait for the vaccines.
Providing financial support for people who have been told to self-isolate – whether because they themselves have tested positive or because someone they have been in contact with has – is an obvious way to try to meet the twin goals of keeping economic activity up and the virus down. Without financial support to stay at home, it is understandable why someone might ignore an instruction to self-isolate, especially if they need to earn money this week to pay for food next week. Although they risk a fine, they will hope to avoid it.
Research into how far people adhered to the more limited test, trace and isolate arrangements in the first wave certainly suggests that such a scheme is needed. According to the research, just 18% of those who should have self-isolated reported that they had actually done so. Men, younger age groups and those with a dependent child were especially likely not to comply.
But if this scheme is right in theory, its implementation has been flawed in practice, both in its design and in the amount of money made available for it by the UK Government. This blog, in two parts, deals with each aspect of the problem separately. This first part looks at eligibility and administration. The second part will look at the scale of funding required.
How the scheme works
Introduced in September, the government scheme provides those who qualify a one-off £500 payment on top of any current benefit income to replace any income lost from not working. To be eligible for support, someone has to have been instructed to self-isolate either by the NHS Test and Trace System or (a later addition) by the NHS COVID-19 app – or following a positive test result. The person must also be employed or self-employed, unable to work from home and liable to lose income due to the required self-isolation period.
The operation of the scheme varies between the four countries. To look at this in more detail, we focus on England, where local authorities have been provided with two pots of money from which to make payments. The first is for people who, by virtue of receiving certain qualifying social security benefits, are automatically entitled to support. The second is a discretionary fund to provide support for those who currently don’t receive the qualifying benefits but are on a low income and will face financial hardship if unable to work. Local authorities may also set additional criteria that have to be met.
£50 million was made available to councils to provide this support for people to self-isolate – £25m for those who get the qualifying benefits, £15m for discretionary payments and £10m to cover administrative costs. The support scheme is to run until 31st January with likely no funding top-ups to the scheme until then and uncertainty about what will happen after.
Concerns and flaws
Several concerns have been raised about the scheme. These include that parents of children asked to self-isolate are not eligible. Recognising this large gap in the scheme, the NHS Wales Test Trace Protect service extended payments to parents and carers.
Most of all though, local authorities say that the government has ‘vastly underestimated’ the demand for support. The Guardian reported at the end of November that 50% to 60% of those who had applied for support had been turned down, with budgets already being used up in just the first month of the scheme. 16 out of the 38 councils it spoke to said they would run out of funds before the end of January. To preserve funds, councils had been forced to be strict with the discretionary payments, in some areas only paying one in five applications. In addition, since the funding for discretionary payment is not ring-fenced, councils would appear to be within their rights to re-allocate the funds to any purpose they wish.
These difficulties with discretionary payments reflect a flaw in the scheme’s design. It is understandable why a government scheme to help “low income” households should use receipt of Universal Credit (UC) as the way to identify such households. It is a mistake, however, to assume that current working UC recipients make up the majority of all who would need support if someone has to stop working. In earlier research (into the interaction between UC and private sickness insurance), we found that besides the roughly one in eight workers whose households receive UC, another three in eight belong to households who would be entitled to UC if they became unable to work (see figure 1).
Figure 1: Half the working population would be entitled to UC if their earnings stopped
“Would you be entitled to UC if your earnings stopped?” and not just “do you receive UC now?” has to be the key question. The Scottish government’s decision explicitly to extend eligibility “to people with a low level of income which means they would be entitled to Universal Credit” seems to recognise this. The trouble, though, is that “entitlement to UC” may not be feasible as a test for what is in effect an emergency scheme. Both the information that the UC claimant has to assemble and the effort that local authorities must put in to review the application seem disproportionate. An incentive to self-isolate needs to work easily and quickly. Mimicking a UC claim does not achieve that.
Our proposed approach
The problem with the scheme is that the right principle is impractical as a basis for emergency support. The scheme tries to resolve this by restricting support mainly to existing UC recipients but this leaves many, if not most, of those who need support without it. Our proposal goes the other way: since the UC means-test is impractical, abandon it and make the payment available to anyone who has been told to self-isolate and cannot work from home.
The objection to such an approach will always be cost and in particular, the ratio of the ‘deadweight’ cost of giving money to people who do not need it, compared with the cost of giving it to those who do. How large is that ratio in this case?
Based on our estimate that half of all workers would be entitled to UC if their earnings stopped, the additional, deadweight cost (for the other half) might be thought to be 100%. That, however is an over-estimate because only about a third of workers who cannot work at home are in the upper half of the pay distribution. Taking that into account brings the ratio down to just under 60%. Since the payment is taxable and those earning above average are more likely to pay tax on it, the ratio is lower still, at 50% or even below.
We think that a deadweight cost of this size is a price well-worth paying for a manageable scheme that stops people who have tested positive, or have been in contact with someone who has, from going out to work. As a high-profile reform, offering this payment to anyone told to self-isolate who cannot work from home, would also remind the public that this – isolation and the protection it affords to others – is actually the purpose of the whole test and trace process.
 Smith, L. and others, Adherence to the test, trace and isolate system: results from a time series of 21 nationally representative surveys in the UK (September 2020)
 The scheme was announced on the 20th September and covered those told to self-isolate from the 28th September.
 Universal Credit (UC), the ‘legacy’ benefits that UC replaced and Pension Credit.
 This has been changed in Scotland but has not been in England as of the time of writing.
 See also D Tomlinson, Sorting it out: The Chancellor moves to fix the Job Support Scheme, Resolution Foundation, October 2020