Chancellor outlines his plan to tackle further unemployment as furlough still planned to end

The Chancellor has today (Thursday 24 September) spoken to Parliament about the next stage of the Government’s plan to nurture the fragile economic recovery by protecting jobs through the difficult winter months.

He explained the main objective remains to protect people’s jobs but the way they achieve that “must evolve”.

He reiterated the message we have heard from both the PM and chief scientific advisors earlier in the week, that the virus and restrictions will be a fact of life for at least the next six months.

The end of furlough

He said that the Coronavirus Job Retention Scheme (CJRS) was the right response at the right time but as the economy reopens, “it is fundamentally wrong to hold people in jobs which only exist inside the furlough”.

Previously the challenges arose from the fact that businesses were ordered to close. Now, most are able to open safely but they face uncertainty and reduced demand over the winter months. Sunak explained how they need support to bring people back to work and protect as many ‘viable jobs’ as possible. In order to do this, the government are launching a new Job Support Scheme.

The Job Support Scheme

This will enable the Government to directly support the wages of people in work – giving businesses the option of keeping employees in work on shorter hours rather than making them redundant. The scheme is built on three principles:

1. It will support ‘viable’ jobs and therefore employees must work at least a third of their normal hours and be paid for that work as normal by their employer. The government, together with employers, will then increase their wages to cover two-thirds of the wages they’ve lost through working reduced hours, with one third being paid by the employer and one third being paid by the government (up to a maximum of £697.92 per month).
2. The Government will target support at businesses which need it most. All small and medium-sized businesses are eligible but larger businesses will only be eligible where their turnover has fallen through the crisis.
3. It will be open to all employers across the UK, even if they have not previously used the furlough scheme.

The scheme will run for six months, starting on 1 November 2020.

It’s important to note that the grant can not be claimed if the employee is on notice of redundancy.

To be eligible, the employee must have been on the employer’s Real Time Information submission on or before 23 September 2020.

Working patterns can vary but each short-time working arrangement must cover a minimum period of 7 days.

Usual wages will have the same meaning as that adopted under the furlough scheme.

It’s thought that the grant will not cover Class 1 employer NIC or pension contributions, but they will remain payable by the employer.

The Government has indicated that the minimum threshold of working one-third of normal working hours, will be increased in months 4 to 6 of the scheme.

Employers keeping furloughed staff can claim both the Job Support Scheme and the Job Retention Bonus.

The existing self-employed scheme will be extended on similar terms and conditions as the new Job Support Scheme.

Supporting businesses

Another major challenge is supporting businesses with cashflow problems. To meet this challenge, the Government are doing the following:

• Bounce back loans – they are now introducing ‘pay as you grow’ which means loans can be extended from 6 to 10 years (which will almost halve the average monthly repayment).

–  Businesses who are struggling can choose to make interest-only payments.

–  For those businesses really struggling, they can apply to suspend payments for up to six months.

–  No business taking up ‘pay as you grow’ will see their credit rating affected as a result.

• The Chancellor is also changing the terms of other loan schemes. More than 60,000 small and medium-size businesses have taken out Coronavirus Business Interruption loans. The Government guarantee on these loans will now be extended for up to 10 years making it easier for lenders to give more time to businesses to pay.
• The deadline for all loan schemes will be extended to the end of 2020.
• The Treasury is working on a new successor loan guarantee scheme which is set to begin in January 2021.
• The Government will also give businesses more time in respect of deferred tax bills. Nearly 500,000 businesses deferred more than £30 billion in VAT this year. Those payments are due in March 2021 but the Government will allow businesses to spread those payments over 11 smaller repayments with no interest to pay. Any self-assessed income taxpayers who need extra help can spread their outstanding tax bill over 12 months from January 2021.
• Hospitality and tourism are to get extra support. On 13 January their VAT rate is due to rise from 5% to back to the standard rate of 20%. This has been cancelled and these sectors will retain the reduced VAT rate until 31 March 2021.

Citation can help at every step of the way

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