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Chancellor Rishi Sunak has said it is “impossible” to predict how many jobs the government’s new wage subsidy scheme will save.
The plan, which will replace leave, will see the government increase the salary of people who cannot work full time.
Its goal is to stop massive job cuts after the government introduced new measures to address the rise in coronavirus cases.
Mr. Sunak said he expected the plan to “benefit a large number” but could not say which work is “feasible or not.”
Under the Labor Support Program, if bosses bring in part-time workers, the government will help them raise their wages with employers to at least three-quarters of their full-time wages.
It will begin on November 1 and will last for six months.
How will the job support plan work?
Under the scheme, the government will subsidize pay for employees who work less than their normal hours due to lower demand.
Employers will pay for hours actually worked. And then the government and the employer will cover together two-thirds of the lost wages. But only staff who can work at least a third of their normal hours will be eligible for the program.
Payment will be based on an employee’s normal salary, capped by the government at £ 697.92 per month.
Why is the government doing this?
Mr. Sunak described the plan as a “radical new policy,” designed “to help protect as many jobs as possible. [and] keep people working part-time instead of firing them. “
However, he said he would only support “viable jobs,” as opposed to jobs that exist because the government continues to subsidize wages.
“It is not my place to sit here and make pronouncements on exactly what work is viable or not, but what we do have to do is develop our support now that we are going through the acute phase of the crisis,” Sunak said in a press release. conference after the plan was unveiled.
“Obviously we cannot sustain the same level of things that we were doing at the beginning of this crisis.”
How many jobs will this save?
The BBC understands that the Treasury estimates that the new Employment Support Program could cover between two and five million people.
However, the chancellor said at a press conference that he would be “lying” if he tried to give precise figures, but said that some unemployment forecasts “are not a good reading.”
Almost three million workers, or 12% of the UK workforce, are currently on partial or full leave, according to official figures. The current licensing regime ends on October 31.
The government’s contribution to workers’ pay will drop dramatically compared to the leave scheme. Under license, he initially paid 80% of a monthly salary up to £ 2,500; With the new scheme, this will be reduced to 22%.
“The main objective of our economic policy remains unchanged – to support people’s employment – but the way in which we achieve it must evolve,” Sunak said.
“I can’t save all the businesses, I can’t save all the jobs.”
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How much will it cost?
The plan will cost the government approximately £ 300 million a month. Businesses that use it can also claim the Job Retention Bonus, where the government pays £ 1,000 for each unlicensed employee who returns to work until at least the end of January.
Mr. Sunak said a similar plan would be available for the self-employed.
Who does it help?
All small and medium-sized businesses will be eligible for the program, but larger businesses will only qualify if their turnover has decreased during the crisis.
It will run for six months from November and will be open to employers across the UK, even if they have not previously used the leave scheme.
Employees must have “viable jobs” to benefit from the scheme, and those in currently closed industries, such as nightclubs, may lose out because there is no work.
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Gavin McQueen, Pryzm’s manager in Leeds, sits at the club, which has not reopened since the UK closed in March.
What do companies think?
Business lobby group CBI welcomed the government’s plan.
“It is correct to target aid to future jobs, but it can only be part-time as long as demand remains stable. This is how skills and jobs can be preserved to allow for a quick recovery,” said CBI CEO, Give me Carolyn Fairbairn.
However, Torsten Bell, executive director of the think tank Resolution Foundation, said the new jobs scheme alone “will not encourage companies to cut hours instead of jobs because the contribution of a third from the employer means that it is a lot cheaper for companies to hire one person full time than two people part time. “
He warned that the £ 1,000 Job Retention Bonus that companies would receive for retaining workers at the end of January, combined with the new scheme, could create a new “chasm” for job cuts.
“We now have a great incentive for companies to retain part-time workers until they qualify for the bonus.”
The Labor Party, meanwhile, said it would support any measures to safeguard jobs, but accused the government of acting too late.
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And the workers?
Tracey Sheppard is a cleaner at a leisure center in Essex who has been on leave since the end of March. She said she hoped the new Employment Support Program would help her, but there are no guarantees.
“They are a very big company that I work for … but I don’t know if they could afford to support me … I don’t know,” he told the BBC’s World At One.
She said she feels “scared” because her family recently moved to the area and this is the only job she can fit into in babysitting.
“I did not hear anything [from my employer]. The last time I heard from them was at the beginning of the confinement. “
What else did the chancellor announce?
The VAT reduction for hospitality and tourism companies will also run until March. The VAT cut from 20% to 5%, which took effect on July 15, was due to expire on January 12 next year.
However, the Food and Beverage Federation (FDF) said this and the new employment plan “did not go far enough” to help the industry that has been affected by the new government restrictions to prevent an increase in cases. of coronavirus.
What about loan repayments?
Mr. Sunak also announced that companies that have borrowed money through the government’s loan scheme will have more time to pay the money back.
The chancellor said that small businesses that obtained “recovery” loans can use a new flexible payment system “Pay as you grow.” It means that loans can be repaid in 10 years instead of the original six-year term.
The longer repayment time also applied to small and medium-sized businesses that borrowed under the Coronavirus Business Interruption Loan Scheme.
Businesses will also have more time to apply for these loans, as well as the Coronavirus Large Business Disruption Loan Scheme and the Future Fund. The application dates for the different plans had to end in October and November.
Will the scheme work?
The new employment support scheme is a fraction of what we have seen in recent months and focuses on those who are deemed to have “viable” jobs. You cannot avoid a sharp rise in unemployment in the coming months in “non-viable” jobs.
Indeed, the economic impact of this multi-billion pound package is likely to be far outweighed, even by this week’s announcement that the UK is facing a ‘new normal’ of six-month social restrictions. .
The Treasury has extended the support bridge that it launched in March to cover the next six months.
But the new scheme requires everyone to contribute. That will be too much for many employers. We are about to find out how many.
Read more here
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