New Jobs Support Scheme announced

The Chancellor has outlined a new Jobs Support Scheme, an extension of the Self Employment Income Support Scheme, a VAT cut for the hospitality and tourism and help for businesses to repay government loans.

Job Support Scheme

Rishi Sunak announced a new Job Support Scheme which will start on 1st November when the furlough scheme ends. Under the scheme, which will run for six months, the government will contribute towards the wages of employees who are working fewer than normal hours due to decreased demand.

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.

Sunak says this means employees who can only go back to work on shorter time will still be paid two thirds of the hours for those hours they can’t work.

He added that 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 an employee’s usual salary, capped at £697.92 per month. The Treasury says this means workers will get 77% of their usual pay.

The Job Support Scheme will be open to SME businesses across the UK even if they have not previously used the furlough scheme and to larger companies if their turnover has fallen by a third. Employers can also claim the previously announced £1K Job Retention Bonus for employers who bring workers back from furlough.

Inadequate response

Tony Wilson on the Institute of Employment Studies said that, while the announcements on VAT and loan extensions were welcome, the Job Support Scheme was an “inadequate” response to the scale of the problem facing the country. He said it would not make economic sense for smaller employers to essentially pay workers more than the hours they were working. He said what was needed was a system more like the German one where employers paid for short-time hours worked and the Government topped up that amount, more investment in the welfare safety net and more help to stimulate hiring. He stated:  “Our analysis suggests that we will see a wave of redundancies that will far exceed what we witnessed in the last recession; unemployment looks set to more than double; and by next year there will likely be around a million people long-term unemployed.”

The Resolution Foundation think tank criticised the decision to end the £20 a week boost to tax credits and universal credit, saying it could leave six million poor households £1,000 a year worse off from next April.

Nigel Morris, tax director at accounting firm MHA MacIntyre Hudson, said the Job Support Scheme could exclude larger employers who need support. He said: “We’ve seen some businesses ‘bounce back’ and may find they match last year’s performance or experience just a small drop in turnover. But in such a volatile economic environment this may not last; the next six months could be very different. A measure based on how they’ve weathered the storm so far may exclude many businesses from support, forcing them to make staff cuts if they predict tougher times ahead.”

He added that there were also concerns that the scheme does not apply to employers who can’t provide any work to employees, such as events organisations. He said: “A targeted scheme for employers who can’t provide a ‘base’ level of work should potentially also be considered.”

Kate Palmer from HR experts Peninsula said the new scheme was “a very different beast” to the furlough scheme. She stated: “It might be just enough to help businesses to retain more employees as we face the prospect of a challenging winter. As it’s impossible to predict what position we will be in by May 2021, it remains to be seen what will happen when this scheme comes to an end.”

And Mike Cherry, chairman of the Federation of Small Businesses, highlighted the continuing lack of support for some self-employed people. He said: “The Chancellor had nothing to say for those left out of the first round of support measures – not least the newly self-employed and company directors.”

Self employment and loans

In addition, the Government is extending the Self Employment Income Support Scheme Grant (SEISS). 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. This is worth 20% of average monthly profits, up to a total of £1,875.

An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April.

As part of the package, the government also announced it will extend the temporary 15% VAT cut for the tourism and hospitality sectors to the end of March next year.  And up to half a million business who deferred their VAT bills will be given more breathing space through the New Payment Scheme, which gives them the option to pay back in smaller instalments. Rather than paying a lump sum in full at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.

The Chancellor also said that around 11 million self-assessment taxpayers will be able to benefit from a separate additional 12-month extension from HMRC on the “Time to Pay” self-service facility, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.

In addition, there was news of greater flexibility for firms with regard to repayment of Bounce Back Loans through a new Pay as You Grow flexible repayment system. This includes extending the length of the loan from six years to 10, which will cut monthly repayments by nearly half. Interest-only periods of up to six months and payment holidays will also be available to businesses.

Other action on loans includes possible extensions on loan periods for Coronavirus Business Interruption Loan Scheme lenders from a maximum of six years to 10 years if it will help businesses to repay the loan. Applications for other government’s coronavirus loan schemes will also be extended.

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