Thursday 24 September 2020 4:37 pm

Rishi Sunak 'ready to do more' if national Covid lockdown declared

Rishi Sunak has vowed that he is willing to extend his newly announced wage subsidy scheme if a further national lockdown is implemented.

Sunak today launched the Jobs Support Scheme, which 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.

Read more: Rishi Sunak’s new job support plan: What do the changes mean for you?

The scheme, which will run for six months from November, 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.

The new spending initiative is being brought into replace the much more generous furlough scheme, which ends next month.

The chancellor said at a press conference just hours after he announced the new Jobs Support Scheme that he would be willing to pay out more to Britain’s workers if another lockdown is called by Boris Johnson.

Before the Open newsletter: Start your day with the City View podcast and key market data

“If you’re asking me if I’m ready to do more as the situation evolves – of course I am,” Sunak said.

“That’s what we have been doing and that’s what we will continue to do as we get through the winter and through to next year.

“We always stand ready to do what’s necessary.”

Sunak was hit by a barrage of questions at the press conference around the cost of the new initiative, which will be far cheaper for the Treasury than the furlough scheme.

The furlough scheme was estimated to have cost around £36bn – equivalent to a quarter of last year’s NHS budget.

The new Jobs Support Scheme will see the government pay a maximum of 22 per cent of a worker’s wages, capped at £697.92 per month.

The chancellor said it was very difficult to calculate the total cost to the Treasury, but gave a very rough estimate of the new scheme costing around £300m a month per 1m signed up.

This is drawn from crude estimates, with Sunak assuming everyone on the scheme was earning the average wage of those on the furlough scheme, £1,400 a month, working the fewest possible hours on the new scheme – one-third of their normal hours.

“If that same person was put on the short term working scheme – on the Jobs Support Scheme – and were only working a third of their hours and getting the maximum support from government that would cost about £300 a month,” he said.

“That would be just over £300m per million [people on the same conditions] a month.

“That assumes they’re only working a third of the time – clearly many people will be working more than that – and that assumes the average wages are the same as the current population of our furloughed workers.”

The government is also extending a temporary VAT cut for the hospitality and tourism sectors until March, which Sunak said would cost the government an extra £800m.

Sunak’s announcements today, which were labelled as the government’s Winter Economic Plan, drew mixed reaction from economists, with some saying it does not go far enough.

Torsten Bell, chief executive of the Resolution Foundation, said that the new scheme does not do enough to incentivise employers to stop redundancies by itself.

“The scheme on its own will not encourage firms to cut hours rather than jobs, because the one-third employer contribution means it is much cheaper for firms to employ one person full-time than two people part-time,” he said.

“But, interaction with the £1000 Job Retention Bonus is really important here – when this new scheme is combined with that we’ve now got a big incentive for firms to retain workers part time until you qualify for the bonus – [the end of January].

“The end of January is the new end of October cliff edge.”

Read more: Economists raise fears over Rishi Sunak’s new job support plan

Paul Johnson, director of the Institute for Fiscal Studies, said: “[Sunak] is trying to plot a difficult path between supporting viable jobs while not keeping people in jobs that will not be there once we emerge from the crisis.

“With employers now having to pay at least 55 per cent of the normal wages of their employees it is clear that many jobs will be lost over the coming months.”

Share: