Chancellor’s ‘winter plan’ will support wages of people in work from November

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 sole focus on topping-up the pay of people in a “viable” job but forced into reduced hours.

The chancellor told MPs the Job Support Scheme would help people working at least a third of their normal hours.

Two-thirds of the pay they have lost would be supported by both the taxpayer and employer, he said.

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Rishi Sunak’s 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, expected to last for six months, would spark waves of redundancies as the current Job Retention Scheme is wound down.

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The furlough scheme, which is closed at the end of next month, has already cost the taxpayer almost £40bn to date while Treasury-backed business loans of £57bn have been handed out.

The Treasury has not disclosed the expected cost of the new initiative.

Mr Sunak 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 Support 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 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.

More details were expected later on the expected cost of the package and small print governing the scheme.

The chancellor said his plans would ensure support was in place during the “more permanent adjustment” to the economy caused by the crisis.

But Labour and unions accused him of delaying, arguing the measures should have gone further while the director of the Institute for Fiscal Studies, Paul Johnson, said: “It is clear that many jobs will be lost over the coming months.”

The IFS said that some jobs that may be viable in the long-term might not be able to be saved in the short-term even at reduced hours – for example at night clubs or businesses that rely on city centre office workers for their sales.

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Business groups largely welcomed the statement.

Adam Marshall, 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.

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