Rishi Sunak has unveiled a new scheme to support wages during the pandemic but admitted that it will leave many facing an uncertain future.
The chancellor announced the new measures in a bid to avert a winter jobs crisis as the current furlough scheme comes to an end and tougher restrictions are introduced to combat coronavirus.
Mr Sunak's plan will see the government, together with employers, top up wages for staff working as little as a third of their normal hours, for six months starting from November – so that they can keep their jobs.
It is designed to save those whose roles will be "viable" in the long term but experts immediately warned that it would not be enough to avert large scale unemployment in the worst-hit sectors.
The chancellor stressed that it was his priority to save jobs but admitted: "I can't promise that everyone can go back to the job that they used to have."
Rishi Sunak's key announcements:
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- 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.
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 though the chancellor said it could cost roughly £300m per million people benefiting from it per month.
Experts at Capital Economics estimated that overall the measures could cost £5bn.
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 Jobs Support Scheme claimants would not be allowed to issue redundancy notices and there would be curbs governing rewards for shareholders.
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.
The scheme will see employees who are working a third of their hours have two-thirds of the pay they might otherwise have lost topped up – half of it by the government and half of it by their employer.
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.
The chancellor said his plans would ensure support was in place during the "more permanent adjustment" to the economy caused by the crisis.
He also indicated that the government was "ready to do more" if tougher restrictions were brought in to try to combat a resurgence in the spread of the virus.
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. pic.twitter.com/8NpIKpQV8y
— HM Treasury (@hmtreasury) September 24, 2020
Pressed on whether unemployment – currently at 1.4 million according to latest official figures – could rise to more than four million, Mr Sunak declined to give "precise numbers" but admitted there were "difficult times to come".
Announcing the measures in the Commons, the chancellor said: "I cannot save every business. I cannot save every job. No chancellor could.
"But what we can do is deal with the real problems businesses and emploRead More – Source