Rishi Sunak will today unveil a multi-billion pound support package for ailing companies as he tries to stave off mass unemployment over winter.
Sunak’s “winter economy plan” is expected to involve further VAT cuts, more emergency business loans and new wage subsidies for part-time workers to replace the furlough scheme.
He will also announce that the planned autumn Budget, which would have set out the next phase of the UK economy’s recovery, has been scrapped due to the country’s emerging second Covid-19 wave.
The chancellor’s new wage subsidy scheme is based on the German government’s Kurzarbeit – short work in English – scheme and will see the government pay some of the wages of people only able to return to part-time work.
The scheme is intended to prevent mass unemployment when the furlough scheme ends on 31 October as many companies still cannot operate at full capacity with current Covid restrictions.
However, it is not as generous as the furlough scheme, with the Treasury worried that extending it would continue to prop up so-called “zombie companies” that only still exist to claim wage payments for staff.
Sunak is also expected to announce an extension to the government’s four emergency business loan schemes until the end of November and that the terms of all loans will be extended from six to 10 years to reduce monthly repayments.
The temporary VAT cut for the hospitality and tourism industries will also be extended until the end of March instead of until the end of January.
A Treasury spokesperson told The Times: “We will always be honest with people about the difficult trade-offs that are involved here.
“Not between health and the economy but between keeping people in jobs and helping them find new ones. And between help in the here and now and rebuilding in the future. That’s what people deserve.”
The German Kurzarbeit scheme sees employers pay the wages of staff while they are at work and the government pay 80 per cent of their wage when they are not.
The Treasury will likely implement similar terms, with speculation that employees will have to work at least 50 per cent of their normal hours to be eligible.
Sunak’s scheme appears to be similar to one that Labour shadow chancellor Anneliese Dodds called for in her party conference speech on Monday.
When asked about Sunak’s plans, Dodds said: “It would have been helpful if they could have announced this sooner because we’ve already seen a wave of redundancies.
“Quite a lot of damage has been done.”