Chancellor Rishi Sunak has announced a new job support scheme, starting on 1 November and lasting six months, with the aim of protecting viable jobs in businesses who are facing lower demand over the winter months due to Covid-19
Sunak made the announcement in the House of Commons as he outlined the government’s plans for continued support for business and individuals once the coronavirus job retention scheme (CJRS) ends on 31 October.
The Chancellor said: ‘Our approach to the next phase of support must be different to that which 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 replacement for the furlough scheme is intended to support people who are in work so they continue on shorter hours rather than being made redundant.
It will apply to employees working a minimum of 33% of their usual hours. For the remaining hours not worked, the government and the employer will pay one third each. This means employees working 33% of their hours will receive at least 77% of their pay.
The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.
All small and medium-sized businesses are eligible but larger businesses will need to show that their turnover has fallen through the crisis.
The new scheme will be open to employers across the UK, even if they have not previously used the furlough scheme.
Employers retaining furloughed staff on shorter hours can claim both the jobs support scheme and the jobs retention bonus.
The Chancellor also announced that the self-employment income support scheme (SEISS) will be extended to support viable traders who are facing reduced demand over the winter months, covering 20% of average monthly trading profits via a government grant.
The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year. This is worth up to a total of £1,875.
An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April.
The Treasury will provide support for lenders so they can offer coronavirus business interruption loan scheme (CBILS) borrowers more time to make their repayments where needed.
Businesses who are struggling can make interest only payments or suspend payments completely for six months.
Bounceback loans, which have given £38bn to over a million small businesses, will be paid back through a ‘pay as you grow’ scheme, extending terms from six to 10 years. Interest-only periods of up to six months and payment holidays will also be available to businesses.
The application deadline for all coronavirus loan schemes – including the Future Fund - has been extended to 30 November.
In addition, the government has extended the 15% VAT cut for the tourism and hospitality sectors to the end of March next year.
Up to half a million business who deferred their VAT bills will be given more breathing space through the new payment scheme, which gives them the option to pay back in smaller instalments. Rather than paying a lump sum in full at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.
On top of this, around 11m self-assessment taxpayers will be able to benefit from a separate additional 12-month extension from HMRC on the time to pay self-service facility, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.
Introducing the changes, Sunak said the plans were designed to ‘strike the finely judged balance between managing the virus and protecting the jobs and livelihoods’ of people across the country’.
Pointing out that originally the government’s response was based on making an immediate intervention at the height of the pandemic to stave off economic collapse, Sunak said the key now to tackling coronavirus was for everyone to ‘learn to live with it and live without fear’.
Simon Michaels, partner at HW Fisher, said: ‘We’re six months into lockdown and businesses are feeling prolonged economic pain. The new jobs support scheme outlined is a positive step, but six months is not enough - a clear strategy is needed beyond March.
‘Changing the terms of loans will be an immediate relief for businesses, but it remains a short term fix.’
However, Carolyn Fairbairn, CBI director-general, said: ‘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.’