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The Chancellor, Rishi Sunak, has announced a new job protection scheme and a range of new business support measures.
Announcing his Winter Economy Plan at a hastily arranged statement in the House of Commons, Mr Sunak said: “Our task now is to move to the next stage of our economic plan, nurturing the recovery by protecting jobs through the difficult winter months.”
The statement came the day after plans to hold an Autumn Budget were scrapped because rising numbers of confirmed cases of Coronavirus and various new restrictions across the UK meant the Treasury no longer considered it appropriate to make long-term plans.
Against this background of increasing case numbers and fears of further new restrictions on the horizon, employers’ groups and trade unions alike had been pushing for new measures to be introduced to replace the Coronavirus Job Retention Scheme (CJRS), which ends in just five weeks’ time.
The upturn in cases reignited widespread fears about the economic impact of the crisis and the possibility of a wave of redundancies being announced in the coming days.
Employers making between 20 and 100 redundancies must begin consulting at least 30 days in advance, meaning the last day they could begin the process before being required to bring staff back from furlough on full pay at the beginning of November is just a week away.
Around three million of the 9.6 million workers ever furloughed are thought still to be furloughed from their jobs, with the scheme having cost £39.3 billion up to 20 September 2020.
As he rose to deliver the statement, just two months after his Summer Economic Statement, the pressure was on Mr Sunak to deliver the “creative and imaginative” solutions to protect jobs and businesses the Prime Minister had promised just 24 hours earlier.
Saying that it is “fundamentally wrong to hold people in jobs that only exist inside the furlough”, the Chancellor announced the launch of a new Job Support Scheme (JSS).
The scheme will come into effect on 1 November 2020 for six months and will apply to employees who work a minimum of 33 per cent of their usual hours. The Government and the employer will then pay one-third of the remaining amount each, with the employee forgoing the pay they would have received for the remaining one-third of their usual hours not worked. The Government contribution will be capped at £697.92 per month.
The scheme means that employees working one-third of their usual hours and not affected by the cap will receive at least 77 per cent of their usual wages, according to the Treasury.
The Chancellor confirmed that the JSS is open to all small and medium-sized enterprises and to larger businesses that have been “adversely affected by COVID-19”, subject to certain conditions such as not making capital distributions including dividends while using the scheme.
The scheme will be open to employers, irrespective of whether they previously used the CJRS. However, the employees they claim for cannot be on a redundancy notice.
Additionally, the Chancellor confirmed that employers will be able to use both the JSS and Coronavirus Job Retention Bonus at the same time. The Coronavirus Job Retention Bonus, announced earlier this year, will provide employers with a one-off £1,000 grant in respect of every employee they bring back from furlough and pay an average of £520 a month between 1 November 2020 and 31 January 2021.
The JSS bares a strong resemblance to the German Kurzarbeit scheme, which was first introduced after the 2008 financial crisis and was reinstated earlier this year. The scheme, which is in some ways less generous than the CJRS, is credited with being effective in saving jobs at a much lower cost to the taxpayer. Both the CBI and TUC had advocated variations of the German scheme.
The Chancellor moved on to announce a six-month extension to the Self-Employment Income Support Scheme (SEISS) for those self-employed individuals currently eligible.
A third grant will cover the three months from November to the end of January, paying 20 per cent of average monthly profits, capped at £1,875.
Meanwhile, a fourth grant will cover the period from February to the end of April, with the level set to be determined at a later date.
Self-employed individuals and members of partnerships to whom all of the following apply are currently eligible for grants from the SEISS:
Carry on a trade that has been adversely affected by Coronavirus;
The scheme is not available to people working through their own limited companies.
Moving away from direct support for employment and self-employment, the Chancellor said the second challenge facing the economy is the effect of the crisis on businesses’ cash flow.
He announced the extension of the Bounce Back Loan Scheme (BBLS) through Pay as you Grow (PAYG), which will allow all businesses in receipt of BBLS loans the option to repay over a period of up to 10 years, nearly halving their monthly payments.
There will also be an option for businesses to move to interest-only repayments for up to three six-month periods or to take one six-month payment holiday. The six-month payment holiday will only be available to businesses that have already made six payments.
The BBLS provides loans of between £2,000 and £50,000, up to a cap of 25 per cent of turnover and backed by a 100 per cent Government guarantee to the lender. The Government covers interest payments for the first 12 months of the loan, with the borrower only required to make repayments after that period.
The deadline for businesses to apply for loans under the BBLS has also been extended until 30 November 2020.
Addressing the other business loan schemes announced since the beginning of the crisis, the Chancellor confirmed that repayments under the Coronavirus Business Interruption Loan Scheme (CBILS) can be extended to a term of up to 10 years.
CBILS is available to UK-based businesses with turnovers of up to £45 million, offering loans of up to £5 million, backed by an 80 per cent Government guarantee to the lender, with the Government also covering interest and fees for the first 12 months.
As with BBLS, the Chancellor confirmed the deadline for applying for CBILS will be extended to 30 November 2020, as will the deadlines for the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Future Fund.
He said that the Treasury is working on “a new, successor loan programme, set to begin in January.”
Meanwhile, he said that the Bank of England’s COVID-19 Corporate Financing Facility will remain open until 22 March 2021.
The Chancellor moved next to deal with outstanding taxes owed by businesses and individuals to HM Revenue & Customs (HMRC), following deferrals earlier in the year.
He confirmed a VAT deferral ‘New Payment Scheme’ which will allow businesses that deferred VAT between March and June 2020 an option to spread payment in 11 equal instalments over the 2021-2022 financial year. The payments had been due in full by the end of March 2021.
The scheme will be open to all businesses that took up the offer of a deferral, but they will need to opt-in to benefit from the extended repayment period. HMRC is expected to put this process in place early in the new year.
He then moved to announce similar arrangements for individuals who deferred their Self-Assessment payments on account in July 2020. Those with up to £30,000 of self-assessment liabilities will be able to arrange an additional 12-month repayment plan through the HMRC self-service Time to Pay facility. This means the deferred payment will not need to be made in full until January 2022.
Finally, the Chancellor confirmed an extension to the temporary five per cent rate of VAT for certain goods and services in the tourism and hospitality sectors from 13 January 2021 to 31 March 2021, after which the rate will revert to 20 per cent.
The extent of the Chancellor’s announcements will have taken many people by surprise, having far exceeded once again the measures that were trailed in advance of his speech.
However, it remains to be seen whether these measures will be sufficient to match the scale of the economic challenge in the months ahead.
The Chancellor will hope that the JSS, in particular, will help avert a wave of redundancy announcements in the coming weeks as the CJRS comes to an end.
Link: Winter Economy Plan