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Mon, 19 October 2020

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Rishi Sunak Has Unveiled A Plan To Top Up Wages For The Next Six Months In His Furlough Replacement Scheme

Rishi Sunak Has Unveiled A Plan To Top Up Wages For The Next Six Months In His Furlough Replacement Scheme

Rishi Sunak laid out his plans to protect jobs through the winter with a replacement for the furlough scheme (Parliamentlive.TV)

5 min read

The Chancellor has unveiled his replacement for the furlough scheme, with a plan to top up people’s wages for the next six months.

In a statement to the Commons, Rishi Sunak said he was moving on to the next stage of his economic plan, “nurturing the recovery by protecting jobs through the difficult winter months”.

He said: “To do that, I'm announcing today the new Jobs Support Scheme. The government will directly support the wages of people in work, giving businesses who face depressed demand the option of keeping employees in a job on shorter hours, rather than making them redundant. 

“The Jobs Support Scheme is built on three principles; first, it will support viable jobs to make sure that employees must work at least a third of their normal hours, and be paid for that work as normal by their employer.

“The government, together with employers, will then increase those people's wages, covering two thirds of the pay they have lost by reducing their working hours, and the employee will keep their job. 

“Second, we will target support at firms who need it the most - all small and medium sized businesses are eligible, but larger businesses only when their turnover has fallen through the crisis. 

“Third, it will be open to employers across the United Kingdom, even if they have not previously used the furlough scheme.”

The Chancellor said the programme will run for six months, starting in November, when the existing furlough scheme comes to an end.

The Treasury said the level of grant will be calculated based on an employee’s usual salary, and capped at £700 per month.

As an example they said for a worker only able to do 33% of their normal hours, they would still be paid 77% of their normal pay - 22% from the government, the other 55% from their employer.

That means companies will have to pay an employee more than half their usual wages to a person doing a third of their usual work.

And he added that he was extending the existing self-employed grant on similar terms and conditions.

“These are radical interventions in the UK labour market, policies we have never tried in this country before,” he told the chamber.

“Together with the jobs retention bonus, the kickstart scheme for young people, tens of billions of pounds of job creation schemes and new investment in training and apprenticeships, we are protecting millions of jobs and businesses.”

Mr Sunak had been under pressure to maintain the furlough scheme beyond next month after a raft of further coronavirus restrictions were introduced.

But he argued it was wrong to keep it going in its current form, warning that the economy “is now likely to undergo a more permanent adjustment”.

He added: "Our plan needs to adapt and evolve in response. Above all, we need to face up to the trade-offs and hard choices coronavirus presents and there has been no harder choice than to end the furlough scheme.

"The furlough was the right policy at the time we introduced it, it provided immediate short-term protection for millions of jobs through a period of acute crisis.

"But as the economy re-opens it is fundamentally wrong to hold people in jobs that only exist inside the furlough."

The Chancellor also announced a "pay as you grow" scheme to help firms who took out bounce back loans more time to repay them, and the temporary VAT reduction from 20% to 5% will remain in place until 31 March 2021.

The government guarantee on the 60,000 coronavirus business interruption loans taken out by small and medium-sized businesses will be extended for up to 10 years, and the Chancellor said he was “starting work on a new successor loan guarantee programme, set to begin in January”.

He added: "Today's measures mark an important evolution in our approach. Our lives can no longer be put on hold. Since May we have taken steps to liberate our economy and society.

"We did these things because life means more than simply existing. We find meaning and hope through our friends and family, through our work and our community.

"People were not wrong for wanting that meaning, for striking towards normality, and nor was the government wrong to want this for them".

Mr Sunak said the responsibility for defeating coronavirus rests on everyone, finishing his statement with: "What was true at the beginning of this crisis remains true now - it is on all of us and we must learn to live with it and live without fear."

In response, the shadow chancellor Anneliese Dodds criticised the time it had taken to announce a successor to the furlough scheme.

She said: "I've called for the introduction of a system of targeted wage support 40 times. 

“That call has been rebuffed by this government 20 times. It's a relief this government have U-turned now.

"But we must be open and honest. That delay in introducing this new scheme will have impacted on businesses' confidence.

"I know that from talking to them, and I'm sure members on the opposite benches know that from talking to businesses in their constituencies."

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