On Friday, Chancellor Rishi Sunak announced an expansion of the job support scheme to protect workers and firms forced to close during coronavirus lockdowns this winter.
The development comes against a background of slowing economic growth, new government restrictions and increasing job losses as the first furlough scheme is about to come to an end, just two weeks after Sunak announced his winter economy plan.
Sunak said that from 1 November, the Government would help ease the financial damage of enforced lockdown by subsidising pay and providing grants to all UK companies, most likely pubs, bars and restaurants. This includes firms that have to close their premises but continue to provide only delivery and collection services, or offer food and drink outdoors.
The Chancellor, under pressure from Conservative MPs, local leaders and the hospitality industry, presented the new scheme, insisting once again that the Government would do ‘whatever is necessary to protect jobs and livelihoods as the situation develops’.
Chancellor accused of ‘u-turn’
Sunak had been assumed to be against providing fresh economic support, going so far as to tell the Conservative party conference last week that there was a ‘sacred duty’ to repair the public finances.
Furthermore, the new scheme comes little more than a fortnight after Sunak launched his winter economic plan, saying that it was ‘fundamentally wrong to keep people in jobs that were only viable inside the furlough’.
But Treasury officials were at pains to point out that the new scheme is merely an add-on to the existing job support scheme and had been created over the summer as part of a ‘menu’ of options to be called upon if new coronavirus restrictions required it.
Under the plan, the Government will pay two-thirds – 67pc – of each employee’s salary, up to a maximum of £2,100 per month, which is a higher amount than the furlough scheme currently offers. Originally, it provided 80pc support but this has been reduced gradually to 60pc, capped at £1,875, from the start of this month.
The coronavirus job retention scheme, aka the furlough scheme, is due to close at the end of October. Offering to subsidise up to 80pc of staff wages, with a cap of £2,500 per month, it required financial contributions from firms from July onwards. The level of support was reduced steadily over the summer to 60pc, with a cap of £1,875, from the start of this month.
Extension of plan criticised as inadequate
The expansion of the job support scheme does not require any contribution from employers and will run alongside the original job support scheme, which pays 22pc of the wages for workers in ‘viable’ jobs on reduced hours, although firms must contribute 55pc.
In addition, the £1,000 job retention bonus, paid per worker and designed to encourage companies to keep staff on payrolls, will continue until January at the least.
The new grant, designed to help meet other fixed costs, is worth up to £3,000 per month for businesses in England. The Treasury stressed that businesses would only be eligible to claim the grant while they were subject to lockdown restrictions and that employees must be off work for a minimum of seven consecutive days.
The new scheme will be available for six months across the UK and will be reviewed in January. Firms will still need to pay national insurance and pension contributions.
However, industry experts condemned the package.
Greg Mulholland, of the Campaign for Pubs said the level of support announced by the Chancellor is nowhere near enough to compensate pubs forced to close. Many publicans, he added, would be forced into more debt just to survive, and there is real anger in the country because pubs have worked hard to operate safely.
The Treasury expects the scheme to cost hundreds of millions of pounds per month, resulting in a cost of several billion pounds for the entire six-month package.