Sunak statement: Chancellor unveils new jobs support plan as Covid cases rise


Rishi Sunak on Thursday announced a new “job support scheme” designed to prop up workers and businesses through the looming Covid-19 winter, but the chancellor warned: “I cannot save every job.”

Mr Sunak’s new package of job support will cost a fraction of the £39bn spent so far on the furlough scheme, which expires on October 31 and supports people unable to work.

In its place Mr Sunak will introduce a German-style six-month wage subsidy scheme — part of a wider “winter economic plan” — to top up the pay of people who can only work part-time.

Under the job support scheme, which will begin in November, the government will help subsidise jobs where workers have not returned full time but are working at least a third of their usual hours. Employees unable to work any of their normal hours will not be eligible.

The programme will be open to workers across the UK even if they were not in the “job retention scheme”, the programme that originally paid 80 per cent of the wages of those on furlough.

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The furlough scheme has been gradually phased out since the summer, with employers paying an increasing proportion of wages. By the end of October, when the programme ends, the level of state subsidy will be at 60 per cent of wages. Mr Sunak’s new scheme will slash government support per job to a maximum of 22 per cent.

The chancellor’s allies estimate that 2m-4m part-time workers might be supported through the scheme, at a monthly cost to the exchequer of about £300m for every 1m workers.

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If 3m joined the scheme it would cost the Treasury almost £1bn a month, instead of about £4bn for the furlough scheme in the last four-week period.

The chancellor also announced to MPs that restaurants, hotels and cinemas would continue to pay value added tax at 5 per cent — rather than the usual 20 per cent — until March 31 next year, at an estimated cost of £835m.

That suggests the total cost of Mr Sunak’s new “winter economic plan”, including the job support scheme, is unlikely to exceed £10bn, a relatively small figure in the context of wider government spending on tackling the effects of the virus.

The Treasury said on Thursday it had committed another £24.3bn for battling Covid-19 since July’s summer statement, at which point the figure stood at just under £190bn.

Most of the money was spent on the NHS, pre-buying and developing vaccines and the test and trace service. Total government Covid-19 spending, including the new winter economic plan, now stands at about £220bn.

Speaking in the House of Commons on Thursday, a day after confirmed daily UK Covid-19 cases jumped by a quarter to 6,178, Mr Sunak said he had spent the summer developing plans to protect the jobs and livelihoods of millions.

“I know people are anxious and afraid and exhausted at the prospect of further restrictions . . . I share those feelings but there are reasons to be cautiously optimistic,” he told MPs.

He said there had been “no harder decision” than the move to scrap the furlough scheme. “But as the economy reopens it’s fundamentally wrong to keep jobs that only exist within the furlough. I cannot save every business, I cannot save every job, no chancellor could.”

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To be eligible for the job support scheme, workers must be able to work a minimum of 33 per cent of their hours. For the remaining hours not worked, the government and employer pay a third of the wages each while the employee would forgo the final third.

Companies would also be able to claim a £1,000 “job retention bonus” — announced by Mr Sunak in July — if they brought people back from the furlough scheme. But Stephen Phipson, chief executive of manufacturers group Make UK, said industry needed more assistance.

However, the Treasury said that “the government expects that large employers will not be making capital distributions (such as dividends) while using the scheme”.

Mr Phipson said the new initiative avoided a “cliff edge” to job support but warned that help was still required for sectors including aerospace and automotives.

“We must also recognise that there are some sectors of manufacturing where there is still not enough demand to even drive part-time work,” he warned. “These are viable, often world leading firms, facing a sustained but temporary absence of demand.”

Separately the government announced fresh support for self-employed workers but only at 20 per cent of average monthly trading profits. Earlier support schemes for the self-employed were set at 80 per cent and 70 per cent of trading profits.

The chancellor said the government would extend the life of four loan schemes, which have already backed £58bn in lending to companies through government guarantees, until the end of November. He meanwhile promised a new successor loan scheme that will begin from January.

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Bounce back loans, targeted at SMEs, could be extended from six years to 10 years, cutting repayments by about 40 per cent. Self-assessed income taxpayers can extend their outstanding tax bill over 12 months from January under the new programme.

Thursday’s package followed this week’s announcement by Boris Johnson, prime minister, of new coronavirus restrictions across England. The new measures, which are expected to last six months, include a 10pm pub curfew and tighter restrictions on weddings.

More than 3m people are still thought to be benefiting from the furlough scheme, which cost almost £4bn in the past four weeks.

Jonathan Geldart, director-general of the Institute of Directors business group, said Mr Sunak’s measures should bring some relief to companies “fearing a harsh winter”, but that it was not yet clear how much the job support scheme would help hard-pressed enterprises hold on to staff.

Kate Nicholls, UKHospitality chief executive, said the employee support was a move in the right direction, but the sector needed more targeted support given that almost 1m people in hospitality were still on furlough. 

However, Carolyn Fairbairn, director-general of the CBI, which had advised the Treasury on the new jobs scheme, said that it “will save hundreds of thousands of viable jobs this winter”. She added: “It is right to target help on jobs with a future, but can only be part-time while demand remains flat.”



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