Rishi Sunak today announced a new “jobs support scheme” , which will see the government support the wages of people working part-time from November in a bid to stave off mass unemployment.
The scheme, described by Sunak as a “radical intervention into the UK labour market”, will allow full-time workers to go back to work part-time and have the government help pay for two-thirds of hours they have lost.
The jobs support scheme, which will run for six months, will be available for all small to medium sized businesses (SMEs) and employees will have to work one-third of normal hours to be eligible.
Self-employed workers will also be able to claim on similar terms from November.
The new scheme came together with a package of other business relief measures – including extending the lengths of business loans taken out under emergency Covid schemes and extending a VAT cut for hospitality and tourism – as a part of the chancellor’s Winter Economic Plan.
“The government will directly support the wages of people in work, giving businesses that face depressed demand the option of keeping employees in a job on shorter hours rather than making them redundant,” Sunak said.
“We will target support at firms that need it most – all SMES are eligible, but larger businesses are only eligible when their turnover has fallen during the crisis.”
Sunak announced the new spending programme in the House of Commons today as a replacement for the furlough scheme, which ends on 31 October.
Experts had predicted a wave of mass unemployment next month when the furlough scheme ended as many companies still cannot operate at full capacity with the current coroanvirus restrictions in place.
“The furlough scheme was the right policy at the time we introduced it… but as the economy reopens it is fundamentally wrong to hold people in jobs that only exist inside the furlough,” Sunak said.
“That means supporting people to be in viable jobs that provide genuine security.”
The Treasury will also extend all its Covid loan schemes until the end of the year, while also allowing businesses to now pay back debts over 10 years instead of six.
This will reduce monthly payments for businesses that have borrowed through one of the four schemes.
The terms of the government’s popular Bounce Back Loans scheme – which sees the government take on 100 per cent of default risk – have also changed to allow businesses to make interest-only repayments or suspend repayments entirely for six months.
The VAT cut – from 20 per cent to five per cent – for hospitality and tourism companies was also extended until the end of March as a part of the government’s Winter Economic Plan.
The Treasury will also allow businesses to pay their deferred VAT payments – announced earlier this year – over 11 installments instead of paying it all back next March.
Labour shadow chancellor Anneliese Dodds said she had called for a targeted extension to the furlough scheme 40 times and that this intervention had come too late.
“It’s a relief this government has U-turned now, but we must be open and honest – that delay in introducing this new scheme will have impacted on businesses confidence,” she said.