The Chancellor Rishi Sunak has announced his Winter Economic Plan in a statement to MPs in the House of Commons.
In the statement, Mr Sunak confirmed again that the UK Government will not be extending the Job Retention (furlough) Scheme, saying that there had been ‘no harder decision’ than to end it.
Sunak said that the government’s primary aim remains to support people’s jobs but that the way it achieves this must evolve and be different to the approach used earlier in the year.
The Chancellor said that it was now clearer that the economy is ‘now likely to undergo a more permanent adjustment’s, saying ‘our plan needs to evolve and adapt in response’.
Sunak warned that ‘I cannot save every business, I cannot save every job, no Chancellor could’ – however, he did announce a number of measures to support jobs over the coming months.
What is the Wage Subsidy Scheme that was announced?
The Chancellor announced a Jobs Support Scheme to directly support wages of people working for small and medium sized businesses, plus larger businesses that have experienced a fall in demand.
The Chancellor said the subsidy scheme will work as follows;
- The scheme will support “viable” jobs. Employees must work at least a third of their normal hours and be paid for this as normal by their employer.
- The government will pay “two-thirds of the pay” employees have lost through working reduced hours.
Similar wage subsidy schemes have been used in other countries, including in Germany.
The UK scheme will start from November for six months, acting as a successor to the furlough scheme.
What other measures were announced?
The Chancellor also announced other measures, including support for the hospitality and tourism sector.
The government has already reduced the VAT rates for the sectors (excluding alcoholic drinks) to 5% down from 20%. The rate had been due to rise again in January, however, the Chancellor has now announced an extension of the period at which the rate being at 5% until 31 March 2021.
Measures will also announced to support businesses that have received government Coronavirus loans. The repayment period for bounceback loans can now be extended from 6 to 10 years. Businesses will also be able to suspend payments for up to 6 months, without the business’s credit rating being affected.
VAT bills will also be made more flexible for some businesses, with firms being able to spread their VAT bill over 11 smaller interest free payments.