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Rishi Sunak expands furlough replacement scheme Rishi Sunak expands furlough replacement scheme
(about 7 hours later)
Chancellor announces fresh support package for businesses as Covid restrictions biteChancellor announces fresh support package for businesses as Covid restrictions bite
Rishi Sunak has announced an expansion of the furlough replacement scheme with the government paying a larger share of workers’ wages to protect companies struggling with Covid-19 restrictions. Rishi Sunak has responded to growing pressure over the level of government support for parts of the country facing tough new coronavirus restrictions with a last-minute expansion of the new furlough scheme.
As pressure mounts on the government over its handling of the pandemic, the chancellor said he would launch a new grant scheme for firms facing tier 2 controls and cut the level of employer contributions companies must make to receive wage subsidies for their workers on the job support scheme (JSS). Moving to appease worried business leaders and backbench northern Tory MPs as more parts of the country are put into higher restriction levels, the chancellor said he would make available billions of pounds in additional aid to protect jobs through a difficult winter.
In an intervention just over one week before the launch of the JSS, which replaces the multibillion-pound furlough programme from the start of November, Sunak reduced the level of employer contribution to 5% of a workers’ usual wage, down from a previous level of 33%. In the fourth major economic update in as many months, the chancellor said he would significantly expand the Treasury’s new flagship job support scheme (JSS) to pay a larger share of workers’ wages than initially planned, alongside more money for the self-employed and grants for businesses in areas affected by local lockdowns.
The government will also cut the number of hours an employee must work before a company can receive support, reducing it to 20% from 33%, so that staff working just one day a week would be eligible. With just over one week before the launch of the JSS, which replaces the multibillion-pound furlough programme from the start of November, the chancellor said he would reduce the level of employer contribution required to access the support to 5% of a workers’ usual wage, down from a previous level of 33%.
He said that meant if someone was being paid £587 for their unworked hours, the government would be contributing £543 and their employer only £44. “These changes mean more employers can access the scheme, and more jobs will protected,” he told MPs in a set-piece economic update. The government will also cut the number of hours an employee must work before a company can benefit, slashing it to 20% from 33%, to enable more firms to utilise the system.
Under the previous plans for the JSS, announced just under a month ago, an employee had to work at least a third of their normal hours. The state would then pay a third of their wages, and their employer another third. Offering a broader funding package in response to anger from Conservative MPs in northern seats where tougher lockdown restrictions have been used for several months already, Sunak said grants worth up to £2,100 per month would be offered to businesses, with the cheques available to be backdated until the start of August.
However, experts had warned that the level of employer contribution was too high and would do little to prevent a tsunami of redundancies over the winter as Covid infections rise and tougher restrictions are imposed. Designed primarily for firms in the hospitality, accommodation and leisure sector struggling under the weight of tighter controls, the Treasury said the value of the grants when added to support for local authorities moving into tier 3 restrictions would be worth more than £1bn. It said the funding could help 150,000 firms in England, including hotels, restaurants and B&Bs that aren’t legally required to close.
The changes come after Sunak met representatives of the hospitality industry, business groups and the TUC on Thursday morning at a Franco Manca pizza restaurant at Waterloo in London, to try to assuage growing unrest over the government’s handling of the pandemic. The changes come after Sunak met representatives of the hospitality industry, business groups and the TUC on Thursday morning at a Franco Manca pizza restaurant at Waterloo in London, in an attempt to patch up relations with industry as growing numbers of firms come under pressure.
Alongside the expansion of the JSS, the chancellor increased the amount of profits covered by its new self-employed grant schemes, from 20% to 40%, meaning the maximum grant will increase from £1,875 to £3,750. Kate Nicholls, chief executive of the UKHospitality lobby group, which represents restaurants, pubs, bars and hotels, said: “This is a hugely generous package of support and very welcome news just when we needed it.”
The Treasury said this was a potential further £3.1bn of support to the self-employed people through November to January, with a further grant to follow covering February to April. “The changes to the Job Support Scheme will help to safeguard hundreds of thousands of jobs and the grant support will provide a crucial lifeline for businesses struggling with low footfall and ongoing costs. It is excellent that the grant has been backdated to when the restrictions began to bite.”
The chancellor also announced additional funding to support cash grants for struggling firms of up to £2,100 per month, primarily for businesses in the hospitality, accommodation and leisure sector. However, critics attacked the government for waiting until the 11th hour to ramp up the level of support for businesses and workers, warning that jobs will have been lost and that not enough help was available for people who had already fallen out of work.
Under pressure from Conservative MPs representing northern areas that have been subject to restrictions for longer than other parts of the country, Sunak said the grants would be available retrospectively for firms in areas that have been under tighter controls. It also comes days after the government blew up talks with the mayor of Greater Manchester, Andy Burnham, over the region entering the highest tier 3 level of Covid restrictions with the two sides just £5m apart over a deal.
The Treasury said the value of the grants, when added to support for local authorities moving into tier 3, would be worth more than £1bn and could benefit 150,000 firms in England, including hotels, restaurants and B&Bs that aren’t legally required to close. Burnham said many of Sunak’s latest initiatives were exactly what he asked the government for when talks broke down earlier this week.
Sunak said: “I’ve always said that we must be ready to adapt our financial support as the situation evolves, and that is what we are doing today. These changes mean that our support will reach many more people and protect many more jobs.
“I know that the introduction of further restrictions has left many people worried for themselves, their families and communities. I hope the government’s stepped-up support can be part of the country pulling together in the coming months.”
The shadow chancellor, Anneliese Dodds, accused the government of presiding over a “patchwork of poor ideas rushed out at the last minute” in recent months. Highlighting the plight of parts of the country that have had to endure tier 2 restrictions “without adequate support”, she lambasted Downing Street’s approach.The shadow chancellor, Anneliese Dodds, accused the government of presiding over a “patchwork of poor ideas rushed out at the last minute” in recent months. Highlighting the plight of parts of the country that have had to endure tier 2 restrictions “without adequate support”, she lambasted Downing Street’s approach.
“How many jobs have been lost, Mr Speaker, because of that inaction? Over a million have already gone,” she told MPs, adding: “Last quarter we saw a record rise in redundancies. The chancellor could have done much more if he had acted sooner.“How many jobs have been lost, Mr Speaker, because of that inaction? Over a million have already gone,” she told MPs, adding: “Last quarter we saw a record rise in redundancies. The chancellor could have done much more if he had acted sooner.
“And now we see yet another last-minute move. Let me ask the chancellor, what’s changed? What’s changed that means this is the right thing to do now but it wasn’t when parts of the north and Midlands entered tier 2 many weeks ago?”“And now we see yet another last-minute move. Let me ask the chancellor, what’s changed? What’s changed that means this is the right thing to do now but it wasn’t when parts of the north and Midlands entered tier 2 many weeks ago?”
She suggested the government was only changing course now tougher restrictions were hitting the capital. She said: “The chancellor has only caught up and listened to the anxiety of workers and businesses when it looks like these restrictions will be affecting London and the West Midlands.She suggested the government was only changing course now tougher restrictions were hitting the capital. She said: “The chancellor has only caught up and listened to the anxiety of workers and businesses when it looks like these restrictions will be affecting London and the West Midlands.
“Will he apologise to those who have already lost their jobs, seen that their businesses slip through their fingers in those areas that have not had that support until now?”“Will he apologise to those who have already lost their jobs, seen that their businesses slip through their fingers in those areas that have not had that support until now?”
She added: “This is becoming like a long-running television show. The winter economy plan, series three. But, you know, the twist is, it didn’t last the winter, it didn’t do enough to help the economy and it wasn’t a plan. We’ve got to get ahead of this crisis, instead of always running to keep up. That’s why Labour’s called for a national circuit breaker to give the chance to reset, to fix the broken test, trace and isolate system.”She added: “This is becoming like a long-running television show. The winter economy plan, series three. But, you know, the twist is, it didn’t last the winter, it didn’t do enough to help the economy and it wasn’t a plan. We’ve got to get ahead of this crisis, instead of always running to keep up. That’s why Labour’s called for a national circuit breaker to give the chance to reset, to fix the broken test, trace and isolate system.”
The expansion of the JSS comes just under a month since the chancellor first announced the plan to subsidise workers’ wages, mimicking a similar system of support for short-time working used in Germany. Under the original scheme envisaged by the chancellor, the state would have paid a third of a workers’ wages, and their employer another third.
However, experts warned from the moment the JSS was first announced that it would do little to prevent a tsunami of redundancies over the winter because the level of employer contribution had been set too high.
Alongside the expansion of the JSS, the chancellor increased the amount of profits covered by its new self-employed grant schemes, from 20% to 40%, meaning the maximum grant will increase from £1,875 to £3,750.
The Treasury said this was a potential further £3.1bn of support to the self-employed people through November to January, with a further grant to follow covering February to April.