Chancellor of the Exchequer Rishi Sunak has announced a suite of measures to support the economy during the coronavirus pandemic in a bid to avoid mass redundancies this winter. The ‘winter economy plan’ was outlined by Sunak in the House of Commons with four major points of action.
The first is a new wage subsidy scheme which seeks to encourage struggling firms to retain employees on short-term hours rather than offering redundancy. It is hoped that this measure will protect jobs after the end of the furlough scheme which is due in October. Employees must work at least one third of their hours and be paid for them. Following this, they’ll be paid two-thirds of their pay for the remaining hours (with the employer and the government paying one-third each). As a result, people will still see lower take-home pay - with the Treasury saying someone who works 33% of their hours would get 77% of their wages. Thus, the grant per worker will be capped at £697.92 per month.
Secondly, a new ‘pay as you grow scheme’ will aim to support business that need help to bounce-back from damage incurred during the lockdown period. This manifests in loans offered to small firms which can extend their bounce-back loans for a decade, from 6 years. This should halve their monthly repayments and make interest-only payments if needed. Thirdly, the hospitality sector will be empowered to retain more revenue after becoming the worst-hit sector of the pandemic. The cut in VAT rates to 5% will now be extended March 31st 2021. Lastly, VAT bills will be deferred with businesses now able to spread out their VAT bill over eleven small payments. Such a measure should lead to the avoidance of an economy-damaging cash crunch in March of 2021.
Sunak told the House of Commons that the economic support approach undertaken by Government has had to evolve as the true size and duration of the coronavirus pandemic impact became apparent. In March of this year, it appeared that a temporary period of disruption was being faced by the UK due to the virus. However, it has now been made clear by scientists and reflected in Government policy that the virus will be a ‘fact of life’ for the next six months and business support strategies must be strengthened and extended to adapt to this new reality. On the furlough scheme, Sunak said that this 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.” He added that as the economy re-opens it would not be right to keep people in jobs that only exist within the bubble of the furlough period.
In terms of testing, Sunak also informed MPs that Government has spent £12bn on the Test and Trace programme. Despite this expenditure, people are more informed of the virus by this stage and the NHS has been given resources that it needs to support treating COVID-19 patients. BIVDA have submitted a detailed proposal for the Comprehensive Spending Review focussing on what support the IVD sector needs to provide COVID-19 and other diagnostics support to the NHS over the coming months. This focusses on advanced manufacturing, nurturing a high-skilled workforce and more investment in research & development.
Responses to the new measures include one from Paul Johnson, the head of the Institute for Fiscal Studies, who said that despite the newly announced Job Support Scheme, many employees will lose their positions of employment in October as companies will struggle to rationalise keeping them on with part-time contracts. He also underlined that the new scheme is less generous than the Furlough scheme. Mel Stride, chairman of the Treasury committee, welcomed the chancellor’s intervention but told Times Radio “there are equal if not greater challenges ahead”. The scheme will run for six months starting in November. Firms can claim both the jobs support scheme and the jobs retention bonus.
The Chancellors closing remarks featured a clear statement echoing the Prime Minister's speech saying that in the coming months people will have to accept and learn to live with the virus.