WITH a warning that he could save ‘every business’, British finance minister Rishi Sunak on Thursday(24) announced a new jobs support scheme which ensures people employed on shorter hours.
The scheme would run for six months, starting in November and be open to all small and medium sized enterprises. Larger firms would only be eligible if their turnover has fallen during the crisis.
He also said he would extend support loan repayments for businesses and delay ending a tax cut for the hospitality sector which has been severely hit by Covid-19 restrictions.
“These are radical interventions in the UK labour market, policies we have never tried in this country before,” Sunak told parliament as he announced the government’s s”Economic Winter Plan”.
“The primary goal of our economic policy remains unchanged – to support people’s jobs – but the way we achieve that must evolve,” he added, acknowledging, however, “I cannot save every business, I cannot save every job.”
At the heart of the new measures is a replacement for the Coronavirus Job Retention Scheme, which supported 8.9 million private sector jobs at its peak in May and ends next month.
Under the new programme, support will only be available to workers whose employers keep them on at least a third of their normal hours. For unworked hours, government and the employer will each pay staff at a third of their normal rate, with a maximum contribution of £698 ($889) a month.
“The government will directly support the wages of people in work, giving businesses who face depressed demand the option of keeping employees in a job on shorter hours, rather than making them redundant,” Sunak told parliament.
Around 5 million jobs were still supported by the previous programme at the end of July, according to tax data, and earlier on Thursday Britain’s statistics agency estimated that one in eight workers were being helped by the programme in early September.
Sunak also said he would extend a cut to value-added tax for hotels, cafes and restaurants until March 31 to support the sectors which are struggling with demand.
He also introduced a new scheme to give businesses flexibility to repay loans taken out during the coronavirus crisis, giving them up to 10 years to repay rather than six.
“To give those businesses more time and greater flexibility to repay their loans, we are introducing Pay-as-you-Grow. This means loans can now be extended from six to 10 years, more than halving the average monthly repayment,” Sunak told parliament.
“Businesses who are struggling can now choose to make interest only payments, and anyone in real trouble can apply to suspened repayments altogether for up to six months.”
Under the government’s Bounce Back Loan Scheme, 1.3 million small businesses have taken out a total of £38billion ($48.4 billion) in loans worth up to £50,000 pounds each, from banks which have received a 100 per cent state guarantee.
The Bank of England forecast last month that unemployment would jump to 7.5 per cent by the end of the year if there were no replacement for the existing furlough scheme ending at the end of October, up from 4.1 per cent in the three months to July.
The opposition Labour Party said the new support had come too late.
The plunge in demand for flights, clothes and nights out has already led to tens of thousands of workers losing their jobs from companies such as British Airways, Rolls-Royce, Marks & Spencer and Whitbread.
Job Support Scheme: Explainer
- Government to contribute to wages of employees who work fewer hours than normal due to decreased demand.
- Will be introduced from Nov. 1 and run for six months.
- Employers will continue to pay the wages of staff for the hours they work.
- But for the hours not worked, the government and the employer will each pay one-third of their equivalent salary.
- Employees must be working at least 33% of their usual hours in order to focus the support on viable jobs.
- The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.
- Government also introducing a Self Employment Income Support Scheme Grant (SEISS).
- The initial lump sum under SEISS will cover three months’ worth of profits for the period from November to the end of January next year. This is worth 20 per cent of average monthly profits, up to a total of £1,875 , the finance ministry said.
- Extra flexibility for the Bounce Back Loan scheme.
- The length of the loan is extended from six years to 10, cutting monthly repayments by nearly half.
- Interest-only periods of up to six months and payment holidays will also be available to businesses.
- Government says it also intends to give Coronavirus Business Interruption Loan Scheme lenders the ability to extend the length of loans from a maximum of six years to 10 years if it will help businesses to repay the loan.
- Sunak said he would extend applications for the government’s coronavirus loan schemes until the end of November.
- The government extended the temporary 15 per cent VAT cut for the tourism and hospitality sectors to the end of March next year.
- Up to half a million businesses who deferred their VAT bills will be given the option to pay back in smaller instalments.
- Rather than paying a lump sum in full at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.
- Around 11 million self-assessment taxpayers will be able to benefit from a separate additional 12-month extension, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.