Last reviewed 25 September 2020
It is to say the least unusual for a Chancellor to cancel one of the Government’s financial set-pieces of the year — in this case the Autumn Budget planned for November — but as Rishi Sunak explained to fellow MPs these are unprecedented times.
Instead, he was in the House of Commons to set out the Government’s proposals for dealing with the expected outcome of the Prime Minister’s recent announcement that Covid-19 restrictions would have to be tightened and could be expected to last at least another six months.
Employers were already anxious at the furlough scheme coming to an end and were wondering how they were going to be able to avoid huge numbers of redundancies as Government support dried up and demand took a further hit from the new restrictions.
The Chancellor’s answer is a new scheme, opening on 1 November and set to be in place for six months.
Job Support Scheme
In an accompanying Tweet, the Treasury explained that, to be eligible for the new Job Support Scheme, employees must work a minimum of 33% of their hours and be in “viable” jobs.
For the remaining hours not worked, the Government and employers will each pay one-third. This means, the Treasury said, that 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. For example, an employee normally works five days a week and earns £350 per week. Under the JSS, they work 40% of normal working hours (two days a week). The percentage of hours lost is 60% (worth £210). The employer pays £140 for hours worked, and a further £70 (one third of hours lost). The Government will pay £70 (one third of hours lost). The employee receives £280 in total per week.
The scheme will be open to small and medium-sized firms across the UK even if they have not previously used the furlough scheme. However, only large businesses that can prove they have been adversely affected by the pandemic will be eligible to apply.
The new scheme is designed to sit alongside the Jobs Retention Bonus; it will not impact upon claims for the bonus.
Businesses can benefit from both schemes in order to help protect jobs, the Chancellor confirmed.
He said that he was also planning to extend the scheme for self-employment on “similar terms” to the new Job Support Scheme.
The Treasury clarified that the Self-Employment Income Support Scheme extension will support viable traders who are facing reduced demand over the winter months (up to 30 April 2021), covering 20% of average monthly trading profits (up to a total of £1875) via a government grant.
The Chancellor then announced what he called a “pay as you grow” scheme for businesses which took Government-guaranteed loans during the crisis.
He explained that loans can now be extended from six to 10 years effectively cutting the average monthly repayment by almost half. Businesses can also move to interest only payments or suspend payments if they are “in real trouble” for up to six months.
Mr Sunak emphasised that their credit rating will not be affected.
Coronavirus Business Interruption Loans will also be extended for up to 10 years, he continued, with a new loan scheme to be introduced in January.
Restaurants, hotels and cinemas will continue to pay VAT at 5% — rather than the usual 20% — until 31 March 2021.
Businesses who deferred their VAT will no longer have to pay a lump sum at the end of March next year. They will have the option of splitting it into smaller, interest free payments over the course of 11 months — benefitting up to half a million firms.
In addition, any of the millions of self-assessed income taxpayers who need extra help can also now extend their outstanding tax bill over 12 months from January.
With the head of the CBI and the TUC General Secretary both photographed outside Number 11 Downing Street with the Chancellor before his announcement, their initial support for his proposals is not perhaps surprising.
For the CBI, Dame Carolyn Fairbairn said: “These bold steps from the Treasury will save hundreds of thousands of viable jobs this winter. Employers will apply the same spirit of creativity, seizing every opportunity to retrain and upskill their workers.”
TUC General Secretary Frances O’Grady agreed that the job scheme will provide a lifeline for many firms with a viable future beyond the pandemic.
“A National Recovery Council should now be convened,” she continued, “bringing together government, business and unions. We can use the winter months to plan an economic spring, with fair rewards for key workers and good new jobs in green industry.”
Comment — Kate Palmer, Associate Director of HR Advisory at Peninsula
As previously expected, today’s statement provided final confirmation that the furlough scheme is to end on 31 October. Its replacement, the Job Support Scheme, would certainly appear to provide a lifeline for businesses who were concerned what the end of furlough would mean; however, this is a very different beast to the original Job Retention Scheme. This new scheme now requires employees to work a minimum one-third of their normal hours, and, this time, the Government’s contribution will be less.
A key positive to take from this announcement is the eligibility for its use — it is open to all small and medium-sized businesses across the UK, regardless of whether they previously used the furlough scheme, although further guidance on what an SME is for the purposes of this scheme will presumably be provided later. While larger businesses are not automatically eligible, they will still be able to use it if they have suffered a drop in turnover.
The scheme might be just enough to help businesses to retain more employees as we face the prospect of a challenging winter. As it’s impossible to predict what position we will be in by May 2021, it remains to be seen what will happen when this scheme comes to an end.
In his own words
The full text of the Chancellor’s speech can be found at https://www.gov.uk/government/speeches/chancellor-of-the-exchequer-rishi-sunak-on-the-winter-economy-plan.