Salary top-up scheme designed to minimise job losses over the next six months will be introduced on 1 November as tighter Covid-19 restrictions remain in place
Speaking in the House of Commons, Chancellor Rishi Sunak outlined the Job Support Scheme and more financial help for businesses this lunchtime (24 September).
Sunak said the resurgence of coronavirus posed a "threat to the fragile economic recovery" and protecting jobs was the government's priority through the "difficult winter months".
All small and medium-sized businesses will be given the option to cut staff hours and pay with the government and employers paying part of the lost wages. Large businesses will be eligible if their turnover has been affected by the Covid-19 pandemic.
Sunak said employees will work shorter hours rather than being made redundant. Employees must work at least a third of their contracted hours under the scheme. For the remaining hours, the government and employer will pay a third of the wages each.
This means an employee working 33% of their hours would get 77% of their salary. He said the plan would " support viable jobs".
From 1 November, for the next six months, the Job Support Scheme will protect viable jobs in businesses who are facing lower demand over the winter months due to Covid-19.
The measures are needed as the second wave of Covid-19 sweeps the country.
Prime Minister Boris Johnson introduced tighter restrictions on public life as a result. These include pubs and restaurants having to close at 10pm from today (24 September).
The furlough scheme introduced to prevent mass-redundancies at the start of lockdown in March is set to expire next month. Millions of workers are still receiving part of their salary through the scheme.
Elsewhere, the self-employed will also be offered continued support on similar terms to the salary top-up scheme.
He also outlined a "pay as you grow" scheme for businesses which took government-guaranteed loans during the crisis. pandemic. Sunak said: "Loans can now be extended from six to ten years nearly halving the average monthly repayment."
AJ Bell senior analyst Tom Selby said: "While the Chancellor had previously made clear the furlough scheme could not continue on the never-never, removing all support just as the UK enters a new - albeit less severe - national lockdown would have risked crippling sectors of the economy which rely on people going out and travelling to work.
"The new Jobs Support Scheme moves away from the emergency ‘furlough' lifeline and aims to support only ‘viable' employment. Employers will be able to reduce the hours employees work by up to 2/3rds, with the Government covering the difference.
"While this might be less generous than the furlough scheme, it at least gives some support to employees and valuable help to businesses hit hardest by lockdown measures.
"In addition, Sunak announced beefed-up business loan schemes and tax cuts designed to ease the cashflow pressure on firms struggling during the pandemic. In particular, the tourism and hospitality sectors will now benefit from a reduced 5% VAT rate until 31 March.
"Taken together, these measures should help ease the pressure currently being felt by businesses and workers up and down the country. However, whether it is enough to prevent a surge in unemployment as we head into winter remains to be seen."
'Pinning its hopes on a vaccine'
Quilter Investors portfolio manager Hinest Patel was less upbeat: "Rishi Sunak's tone shows the government is hoping the economy can swiftly and efficiently adapt to the new ways of life. He made it clear that only viable jobs will be supported as the priorities have shifted as the pandemic does. While this is ultimately the correct approach in the long-term, this update was somewhat lacklustre.
"The government is clearly pinning its hopes on a working vaccine in fairly swift order, but in the meantime, it should not be something they should be relying on. It is pleasing to see the VAT cut extended for tourism and hospitality, along with the introduction of a new job support scheme, but there is nothing in this update to get the economy moving in the right direction."
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