The government is to pay two-thirds of workers’ wages at businesses forced to close during new coronavirus lockdowns, the chancellor has announced.
Rishi Sunak said the government would subsidise pay by providing grants to all UK companies forced to shut their doors – likely to be pubs, bars and restaurants – due to the fresh controls imposed in Scotland and expected to be put in place in England next week. There will also be new grants paid direct to businesses to help them meet other costs.
The shift in government policy comes as ministers prepare to follow Scotland with tougher new local restrictions, starting in the north, where Covid-19 cases have dramatically increased in recent weeks. It also comes as official figures showed that more than one in 10 workers in Britain – almost 3m people – were still furloughed in early September.
The new plan launching on 1 November, said the chancellor, is an expansion of the job support scheme announced last month, in his winter economy plan, which was designed to replace the furlough measures which protected more than 9m jobs in the summer.
The furlough programme closes at the end of October, and the chancellor has repeatedly insisted it would not be extended. However, the rapid rise in infections has forced the government to draw up new lockdown measures which could riskhundreds of thousands of jobs without new financial support from the taxpayer.
Friday’s expansion of the new job support scheme effectively replicates the furlough under a new name, but with some differences.
Under the plan, the government will support eligible businesses by paying two-thirds of each employee’s salary, up to a maximum of £2,100 a month.
This is a higher payout than the furlough scheme is offering currently. It originally offered 80% support but had been gradually reduced to 60%, with a cap of £1,875, from the start of this month.
The new grant that is designed to help cover other fixed costs is up to £3,000 per month for firms in England. Devolved administrations in Wales, Scotland and Northern Ireland will receive a total of £1.3bn in increased funding this year to cover similar measures.
The new scheme is a higher level of taxpayer support than Sunak was offering when he announced his winter economy plan. The original job support scheme covered only staff in “viable” jobs who can work reduced hours and it offered public money to cover 22% of worker’s pay. It would have provided no support to staff working for businesses forced to close their doors.
Rishi Sunak said: “Throughout the crisis the driving force of our economic policy has not changed. I have always said that we will do whatever is necessary to protect jobs and livelihoods as the situation evolves.
“The expansion of the job support scheme will provide a safety net for businesses across the UK who are required to temporarily close their doors, giving them the right support at the right time.”
The Treasury said businesses will only be eligible to claim the grant while they are subject to lockdown restrictions. Employees must be off work for a minimum of seven consecutive days. The new scheme will will be available for six months, with a review in January and will be UK wide.
The Treasury expects the cost of the new scheme to run to hundreds of millions of pounds a month, putting the cost of the entire six-month package at several billion pounds.
Asked whether the measure isn’t just an extension of the furlough, a Treasury official said: “The very clear difference is that this is targeted at firms that are required to close.”
The official insisted Friday’s expansion had always been envisaged, if closures became more widespread.
The general secretary of the TUC, Frances O’Grady, welcomed the scheme but said some industries still needed targeted help this winter: “This scheme will protect jobs in businesses forced to close by local restrictions. But ministers still need to do more to stop the devastation of mass unemployment … Nationally, industries like the arts, hospitality, retail and aviation face a long, tough winter. These sectors need targeted help.”
Adam Marshall, director general of the British Chambers of Commerce welcomed Sunak’s new scheme but also said it did not go far enough. He said the new local restrictions and lockdowns would hit many other firms, especially in supply chains and in town and city centres. “Their cash-flow concerns and worries about future demand, must be heeded,” he added.
With weeks left until furlough ends, economists have warned that unemployment could more than double to 4m by the end of the year – with youth unemployment hitting 17%, the highest level since the 1980s.
The announcement of fresh support also comes as official figures showed Britain’s economic recovery from the Covid recession was already slowing before the launch of new restrictions this autumn.
Gross domestic product (GDP) rose by just 2.1% in August from the level in July, falling short of forecasts for a growth rate of 4.4%, despite a boom in consumer spending at hotels, pubs and restaurants fuelled by the government’s Eat-out-to-help-out scheme.
Analysts expect the UK economy to struggle for growth in the months ahead amid the second wave of coronavirus infections and as the government orders fresh restrictions on business and social life.
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