Sunak weighs new wage subsidy scheme for workers

It is understood that Chancellor Rishi Sunak is looking for options to replace the licensing scheme when it expires at the end of October.

These include a salary supplement scheme similar to those already in operation by the French and German governments.

During the Prime Minister’s Questions, SNP and Labor MPs urged Boris Johnson to act quickly to prevent what was called a “tsunami of job losses.”

The prime minister said Sunak was working on “creative and imaginative” solutions.

These are believed to include allowing companies to cut employees’ hours while keeping them on a job, and the government pays part of the lost wages.

The German “Kurzarbeit” scheme and its French equivalent have attracted a lot of attention in the UK from both employers and trade unions, with the CBI and TUC in favor.

They fear unemployment will rise when the leave plan ends as companies struggle to keep workers on the payroll.

On Tuesday, Bank of England Governor Andrew Bailey called on the government to “stop and reconsider” the licensing plan, although he did not support any particular alternative.

The Treasury declined to comment.

What are the possible options?

• Kurzarbeit from Germany: The employer cuts the working hours of the workers and the government pays them a percentage of the money they would have lost as a result. It’s a long-established scheme, but it has been revised during the pandemic. Now it can last up to 21 months and the percentage of lost wages paid by the government can now reach 80%.
• France’s “chômage partiel”: The French scheme, known as “partial unemployment” or “partial activity,” also predates the coronavirus pandemic. Companies can reduce employees’ working hours by up to 40% for up to three years. Employees still receive almost all of their normal salary, and the government pays a percentage of the cost.
• CBI Tip: A government salary supplement should be available as long as employees can work at least 50% of their normal hours. The company would pay the actual hours worked in full, but the employee would be paid for two-thirds of the hours lost, with the cost shared between the company and the Treasury. The subsidy would last up to one year.
• TUC Tip: A more generous version of the above. Employees could work a smaller proportion of their normal hours and remain eligible, while being guaranteed 80% pay for lost hours, or 100% if they have minimum wage.

Is this sustainable?

While there are fears that the cost of a replacement license scheme could further hurt the economy, others argue that continued government support for jobs is needed to stem the rise in unemployment beginning in November.

Proponents of a salary top-up plan also point to the fact that both France and Germany have expanded their plans to work for the whole of next year.

A short-term work program could also be cheaper than the leave plan, which guarantees 80% of employee wages up to a limit of £ 2,500 a month.

That plan has cost £ 39.3 billion so far, while the Germans estimate that Kurzarbeit’s bill during the pandemic will reach € 33.5 billion (£ 31 billion) by the end of 2021, though that naturally depends on the progress of the pandemic.

Pressure mounts

During the prime minister’s weekly questions, Johnson was pressured by MPs on all sides to act quickly and help businesses hardest hit by the new restrictions on leisure and economic activity.

Citing Whitbread’s announcement that it planned to cut up to 6,000 jobs in the UK, Labor leader Sir Keir Starmer said the threat to employment was “not theoretical”.

“The CBI, the TUC, the Federation of Small Businesses, the British Chamber of Commerce and the Governor of the Bank of England are calling on the prime minister to stop and reconsider and not withdraw the license,” he said.

“We’ve been saying it for months. When is the prime minister finally going to act?”

SNP Westminster leader Ian Blackford said 60,000 workers in Scotland faced “being sold for scrap” if the leave plan was not extended, while Labor’s Graham Morris said there was a risk of “a tsunami loss of jobs within 38 days. ”

In response, the prime minister acknowledged that many companies faced “very difficult circumstances” and, although an “indefinite extension” of the licensing plan was out of the question, further support was being worked on.

“That is why we are facing a massive package of investment in employment and growth in the short, medium and long term,” he said. “In addition to the package I laid out yesterday, there will be creative and imaginative measures by the Chancellor to help people overcome this crisis.”