The Chancellor has today announced the government’s Winter Economy Plan aimed at protecting jobs and supporting businesses impacted by coronavirus over the coming months.
Sunak has said “The primary goal of our economic policy remains unchanged - to support people’s jobs - but the way we achieve that must evolve.”
Key employment-related elements of the Winter Economy Plan are:
• Job Support Scheme
Replacing the Job Retention Scheme ending on 31 October 2020, this new scheme will be introduced from 1 November 2020 and will run for six months. Under the new scheme the government will contribute towards wages of employees who are working fewer than normal hours due to decreased demand over the winter months. Employers will continue to pay the wages of staff for the hours they work - but for the hours not worked, the government and the employer will each pay one third of their equivalent salary. In order to support only viable jobs, employees must be working at least 33% of their usual hours. The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month. The Job Support Scheme, with stricter eligibility criteria than the Job Retention Scheme, is aimed at helping SMEs (as well as some larger businesses who have experienced a significant fall in turnover). It will be open to businesses even if they have not previously used the Job Retention Scheme and in parallel with the Job Retention Bonus scheme, but employees cannot be made redundant whilst their employer is claiming the grant. The government has published a factsheet but we will need to wait for further guidance and any regulations to be published for more detail.
• Extension of the Self-Employment Income Support Scheme (SEISS)
SEISS is being extended on similar terms to the new Jobs Support Scheme. An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus. The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year. An additional second grant will be available for self-employed individuals to cover the period from February 2021 to the end of April 2021. The government has published a short factsheet and HMRC will provide further guidance in due course.
Other measures include:
• Extension of 15% VAT cut for the hospitality and tourism sectors until 31 March 2020
Companies that deferred their VAT payments have the option to pay these back in smaller instalments over the course of 11 months, rather than a lump sum payment in March.
• Flexibilities for businesses repaying government-backed loans
Several measures have been introduced, including extension of the repayment period for Bounce Back Loans from six years to ten, businesses can move to interest only payments or suspend payments if they are "in real trouble" for up to six months, Coronavirus Business Interruption Loans will also be extended for up to ten years (no credit ratings will be affected), and there is a new loan scheme planned for January.
Reaction to the changes has been broadly positive, with support offered from the leaders of both the CBI and TUC. Frances O’Grady, head of the TUC stated "Unions have been pushing hard for continued jobs support for working people. We are pleased the chancellor has listened and done the right thing” and that the Job Support Scheme will "provide a lifeline for many firms with a viable future beyond the pandemic". Support has also been offered by Make UK, the British Chamber of Commerce and the ADS Group.
There have been statements of caution in reaction too, with Jonathan Geldart, Director General of the Institute of Directors saying “As the virus wears on, the Treasury is right to seek a balance between protection and adjustment. However, at first blush it’s not yet clear how much the Job Support Scheme will help hard-pressed firms hold onto staff. The Chancellor may also have missed a trick by not combining the Scheme with measures to encourage wider job creation, for instance by lowering employment costs through reduced Employers' NICs.” These statements were echoed by the TaxPayers’ Alliance.