Government to top up wages as Rishi Sunak says 'the cost of coronavirus is paid by all'
Rishi Sunak has promised to top up the wages of employees in "viable" jobs as he announced new economic support measures to counter the impact of coronavirus.
The Chancellor, speaking in the House of Commons, said the primary goal remains “to support people’s jobs” after Boris Johnson announced new restrictions earlier in the week.
He said he shared the public’s concerns about the continuing impact of the coronavirus pandemic.
And added: “I know that people are anxious and afraid and exhausted about the prospect of further restrictions on our economic and social freedoms. I share those feelings, but there are reasons to be cautiously optimistic."
Mr Sunak said that the Government has now provided “over £12 billion for Test and Trace”.
“In economic terms, while our output remains below where it was in February, we have seen three consecutive months of growth and millions of people have moved off the furlough and back to work.”
But he said: “So our task now is to move to the next stage of our economic plan, nurturing the recovery by protecting jobs through the difficult winter months.
“The underlying rationale for the next phase of economic support must be different to what came before.
“The primary goal of our economic policy remains unchanged – to support people’s jobs – but the way we achieve that must evolve.”
The package announced by Mr Sunak includes a new Jobs Support Scheme to protect millions of returning workers, extending the Self Employment Income Support Scheme and a 15 per cent VAT cut for the hospitality and tourism sectors, and help for businesses in repaying government-backed loans.
But Mr Sunak said it is “fundamentally wrong” to hold people in jobs that only exist inside the furlough scheme.
He told the Commons: “Our economy is now likely to undergo a more permanent adjustment. The sources of our economic growth and the kinds of jobs we create will adapt and evolve to the new normal.
“And our plan needs to adapt and evolve in response. Above all, we need to face up to the trade offs and hard choices coronavirus presents and there has been no harder choice than to end the furlough scheme.
“The furlough was the right policy at the time we introduced it, it provided immediate short-term protection for millions of jobs through a period of acute crisis.
“But as the economy re-opens it is fundamentally wrong to hold people in jobs that only exist inside the furlough.”
But he said the new Jobs Support Scheme would allow businesses to keep employees in a job on shorter hours.
“I’m announcing today the new Jobs support scheme,” Mr Sunak told the Commons.
“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. “
He said the scheme will cover “two-thirds of the pay they have lost by reducing their working hours”.
He told the Commons: “The Jobs Support Scheme is built on three principles.
“First, it will support viable jobs. To make sure of that employees must work at least a third of their normal hours and be paid for that work as normal by their employer. The Government, together with employers, will then increase those people’s wages covering two-thirds of the pay they have lost by reducing their working hours, and the employee will keep their job.
“Second, we will target support at firms who need it the most. All small and medium-sized businesses are eligible but larger businesses only when their turnover has fallen through the crisis.
“Third, it will be open to employers across the United Kingdom, even if they have not previously used the furlough scheme.
“The scheme will run for six months starting in November and employers retaining furloughed staff on shorter hours can claim both the Jobs Support Scheme and the Jobs Retention bonus.”
Mr Sunak said the Government will provide similar support for the self-employed.
He told the Commons: “I am extending the existing self-employed grant on similar terms and conditions as the new Jobs Support Scheme.”
And he said bounce back loans have given more than one million small businesses a £38bn boost to survive, adding a “pay as you grow” scheme would be introduced to give these firms more time to repay the loans.
He told the Commons: “This means loans can now be extended from six to 10 years, nearly halving the average monthly repayment.
“Businesses who are struggling can now choose to make interest-only payments and anyone in real trouble can apply to suspend repayments all together for up to six months.
“No business taking up pay as you grow will see their credit rating affected as a result.”
Mr Sunak said more than 60,000 small and medium-sized businesses have taken out coronavirus business interruption loans, adding the Government guarantee on these loans would be extended for up to 10 years.
He said he will extend the deadline of all the Government’s loan schemes until the end of the year, adding: “We are starting work on a new successor loan guarantee programme, set to begin in January.”
The Chancellor said nearly 500,000 businesses deferred more than £30 billion of VAT this year, explaining businesses will be allowed to spread this bill over 11 “smaller repayments with no interest to pay”.
Dame Carolyn Fairbairn, CBI Director-General, said: “These bold steps from the Treasury will save hundreds of thousands of viable jobs this winter. It is right to target help on jobs with a future, but can only be part-time while demand remains flat. This is how skills and jobs can be preserved to enable a fast recovery.
“Wage support, tax deferrals and help for the self-employed will reduce the scarring effect of unnecessary job losses as the UK tackles the virus. Employers will apply the same spirit of creativity, seizing every opportunity to retrain and upskill their workers.
“The Chancellor has listened to evidence from business and acted decisively. It is this spirit of agility and collaboration that will help make 2021 a year of growth and renewal.”
Mr Sunak addedit is everybody’s responsibility to defeat coronavirus as “the cost is paid by all”.
He told the Commons: “Today’s measures mark an important evolution in our approach. Our lives can no longer be put on hold. Since May we have taken steps to liberate our economy and society.
“We did these things because life means more than simply existing. We find meaning and hope through our friends and family, through our work and our community.
“People were not wrong for wanting that meaning, for striking towards normality, and nor was the Government wrong to want this for them.
Mr Sunak added: “The truth is the responsibility for defeating coronavirus cannot be held by Government alone. It is a collective responsibility shared by all because the cost is paid by all.”