Government to top up wages of 'viable' jobs when furlough scheme ends

The government will look to stave off a potential wave of redundancies this autumn by topping up the wages of "viable jobs" when the furlough scheme comes to the end, Chancellor Rishi Sunak announced on Thursday.

Addressing the House of Commons after scrapping the autumn Budget, Sunak confirmed that the Coronavirus Job Retention Scheme would end as planned on 31 October, noting that he “cannot save every job – no Chancellor could”.

And he warned: “The responsibility for defeating coronavirus cannot be held by government alone. It is a collective responsibility shared by all because the cost is paid by all. We must learn to live with it and to live without fear.”

Around 3m workers currently remain on partial or full furlough leave.

But he conceded that conditions remained difficult for many, and said the government was therefore introducing a new Jobs Support Scheme, which will allow employers to retain staff on shorter hours rather than make them redundant.

Under the six-month scheme, which starts in November, employees in “viable jobs” must work at least a third of their normal hours and be paid for that work. The government will then top up that pay, with the government and employer each paying staff at a third of their normal rate, capped at £698 per month.

All small and medium-sized enterprises are eligible for the scheme, whether or not they have already furloughed staff. Larger businesses must show that revenues have fallen during the crisis, however.

Sunak said: “These are radical interventions in the UK labour market, polices that we have never tried before.”

The Chancellor also extended government loan schemes, and announced that the reduction in VAT for the hospitality and tourism sectors – to 5% from 20% – would be extended until 31 March 2021.

Sunak said: “The second major challenge is helping businesses with cashflow. Right now, businesses need every extra pound to protect jobs, rather than repaying loans and tax deferrals.”

Deferred VAT payments can also now be paid back in 11 monthly instalments, rather than in one lump sum, as originally planned. The Chancellor said £30bn of VAT had been deferred by around 500,000 companies.

Bounce Back Loans can be extended to 10 years from six years, with the option to make interest-only payments or temporarily suspend repayments for firms that are struggling. The government guarantee on the Coronavirus Business Interruption Loan scheme has also been extended, to ten years.

The deadline for all loan schemes has been extended to 31 December, and Sunak said the government was working on a new scheme to be launched in January.

Prime Minister Boris Johnson told the BBC: “The Chancellor is being totally realistic with people about the prospects of the economy. It’s absolutely vital that we all work together to get the R rate down and then simultaneously allow education and the economy to continue.”

Carolyn Fairbairn, director-general of the CBI, welcomed the measures: “These bold steps from the Treasury will save hundreds of thousands of viable jobs this winter.

“Wage support, tax deferrals and help for the self-employed will reduce the scarring effect of unnecessary job losses as the UK tackles the virus.”

Tom Selby senior analyst at AJ Bell said: “Removing all support just as the UK enters a new, albeit less severe, national lockdown would have risked crippling sectors of the economy which rely on people going out and travelling to work.

“While [the scheme] might be less generous that the furlough scheme, it at least gives some support to employees and valuable help to business hit hardest by lockdown measures.”

But Kallum Pickering, senior economist at Berenberg, said: “While the wage subsidiary scheme should help to reduce a likely spike in redundancies, it will only work if the economy avoids a second lockdown.

“Amid the renewed surge in Covid-19 cases in the UK, the near-term economic outlook has darkened materially. With luck, the modest new restrictions will help bring down the case load while not inhibiting economy activity so badly that the economy stalls.

“However, in case of a new lockdown, or a serious further righting of restrictions, the Chancellor may yet need to step up the emergency support, including more generous measures to support jobs.”

And Anneliese Dodds, the shadow Chancellor, tweeted: “I welcome the Chancellor’s eleventh-hour decision to finally abandon his furlough cliff edge, but this U-turn will be too late for too many workers.”