Chancellor Rishi Sunak has revealed a successor to the furlough scheme as he bids to avert a winter jobs crisis following tougher restrictions to combat coronavirus.
Wage subsidies form part of a package of new measures to support the economy through the latest phase of the COVID-19 pandemic – with the focus on topping-up the pay of people, working at least a third of their normal hours, in a “viable” job.
The chancellor told MPs the Job Support Scheme would cover two-thirds of the pay they have lost, with the employer picking up the bill for actual hours worked.
His key announcements:
- The Job Support Scheme will begin in November and run for six months
- Self-employment income support scheme extended
- A “pay as you grow” extension to the Bounce Back Loan scheme will give businesses 10 years to repay them
- VAT cut to 5% for hospitality and tourism extended until the end of March.
Mr Sunak was forced to act amid widespread warnings that fresh curbs on business activity this week to combat the disease, that could last for six months, would spark waves of redundancies as the current Job Retention Scheme is wound down.
That has already cost the taxpayer almost £40bn to date while Treasury-backed business loans of £57bn have been handed out.
The chancellor said: “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.”
Crucially, he added that Job Retention Scheme claimants would not be allowed to issue redundancy notices and there would be curbs governing rewards for shareholders.
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He explained that the Job Support Scheme was open to any business though larger firms would only be able to access it if they could demonstrate a slump in turnover.
He also confirmed that firms retaining furloughed staff on shorter hours could claim both the Jobs Support Scheme and the previously announced jobs retention bonus – a reward of £1,000 paid to companies for every furloughed employee who returns to work.
Labour and unions responded by saying that the government should have gone further while the director of the Institute for Fiscal Studies, Paul Johnson, said via Twitter: “A lot on furlough now likely to lose their job.”
Business groups largely welcomed the statement.
Adam Marshall, the director general of the British Chambers of Commerce, said: “The measures announced by the chancellor will give business and the economy an important shot in the arm.
“Chambers of Commerce have consistently called for a new generation of support to help protect livelihoods and ease the cash pressures faced by firms as they head into a challenging and uncertain winter.
“The Chancellor has responded to our concerns with substantial steps that will help companies preserve jobs and navigate through the coming months.”
Mark Serwotka, general secretary of the PCS union, wanted a full extension of the original furlough scheme.
“The chancellor’s measures are akin to using a plaster to cover a gaping wound”, he said.