Chancellor Rishi Sunak has revealed a host of new support measures to protect the economy over the winter period. The primary goal of economic policy is to support jobs.
The new measures will work to protect as many “viable jobs” as possible and target support at firms that “need it the most”.
Today, Chancellor Rishi Sunak announced a new Job Support Scheme. This will see the government supporting the wages of those in part-time work. The scheme will support keeping employees in work on shorter hours rather than making employees redundant. This new scheme is built on 3 main principles:
- It will support viable jobs to make sure employees must work at least 1/3 of their normal hours and be paid for that work as normal by their employer. The government and the employer will increase the employee’s wages covering 2/3 of the pay they have lost by reducing their working hours.
- Support will be targeted at firms who need it the most. All small and medium businesses are eligible. However, larger businesses are only eligible when their turnover has fallen during the crisis.
- It will be open to employers across the UK even if they have not previously used the furlough scheme.
This will mean that employees will receive a minimum of 77% of their wages under the new scheme. The scheme will run for 6 months starting in November. Employers retaining furloughed staff on shorter hours can claim both the Job Support Scheme and the Job Retention Bonus.
Rishi Sunak announced that the Furlough Scheme is to end as planned as it provided “immediate short-term protection”, but we now must create new opportunities to allow the economy to move forward.
The chancellor has also announced an extension to the Self-Employed Grant on similar terms and conditions as the new Job Support Scheme. More information will follow on this.
Alongside supporting jobs, the second major challenge is supporting businesses with cash flow. Over the past 6 months, the government has supported businesses with tax deferrals and government-backed loans.
Four further steps are being introduced by the government to support this:
To support wages the chancellor has unveiled the Pay as You Grow loans. Bounce Back loans have provided businesses with a £30 billion boost to survive the pandemic. To give businesses more time and greater flexibility to repay loans they are introducing a Pay as You Grow loan. Loan repayments can now be extended from 6 to 10 years. Halvling the average monthly repayment. Businesses can now choose to pay interest only repayments. Anyone can apply to suspend all repayments up to 6 months. Any business taking out pay as you grow will not see their credit affected as a result.
The governments are also changing the terms of other loan schemes. Over 60 thousand SME’s have now taken out the Coronavirus Business interruption Loan. To help businesses Rishi Sunak is extending the government guarantee on these loans for up to 10 years making it easier for lenders to give people more time to repay. Rishi is also extending the deadline on all loan schemes to the end of this year. The government is developing a new Successor Loan Guarantee program set to begin in January.
The government also aims to give businesses more time and flexibility with their deferred tax bills. Half a million businesses deferred more than £30 billion of VAT this year. These payments were due in March next year. Instead, they are allowed to spread the VAT bills over 11 smaller payments with no interest to pay. Any of the millions of self-assessed income Taxpayers who need extra help can also now extend their outstanding Tax bill over 12 months from next January.
The final step will support the two most affected sectors; hospitality and tourism. On current plans, their VAT will increase from 5% back to the standard rate of 20% on January 13th. To support more than 150,000 businesses and help protect 2.4 million jobs Rishi Sunak has cancelled the planned 20% increase and is keeping the 5% VAT rate until March 31st next year.
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