Job Support Scheme: Rishi Sunak announces plan to top up wages of workers on reduced hours

Chancellor Rishi Sunak has announced a Job Support Scheme to top up the wages of employees unable to work full-time because of coronavirus restrictions over the winter.

The scheme - which analysts said was “significantly less generous” than the furlough system which supported more than 9 million workers during the first wave of Covid-19 - formed part of a Winter Economy Plan unveiled by the chancellor in the House of Commons which also included VAT breaks for hospitality and tourism, grants for the self-employed and deferred repayment of business loans.

Mr Sunak confirmed that furlough will end as planned on 31 October, despite warnings that this will lead to a “tsunami” of job losses. The new support scheme will begin the following day, but previously furloughed workers will not be eligible unless they can work at least one-third of their normal hours.

Prime minister Boris Johnson  did not attend Mr Sunak’s statement, which replaced the cancelled autumn budget. But speaking during a visit to Northamptonshire, Mr Johnson said the chancellor was “being totally realistic with people about the prospects of the economy - things will be tough”. 

In a press conference shortly after his statement, Mr Sunak acknowledged there would be be more jobs lost on top of the “tragic” 700,000 already claimed by the pandemic, but refused to say how many.  He said it would be “unaffordable" to maintain support schemes put in place in the spring when it was hoped that disruption to the economy would only last a few months.

Independent economists put the cost of the chancellor’s winter plan at around £5 billion, on top of the £160 million already spent by the government. But Mr Sunak declined to put an exact price tag on the package, beyond saying that VAT measures will cost around £800 million and job support about £300 million a month for every 1 million workers enrolled. 

 Labour’s shadow chancellor Anneliese Dodds said she was relieved that the government had “U-turned” after 40 times ignoring her calls for targeted support for jobs to follow the withdrawal of furlough. But she said Mr Sunak’s package came “too late” for many workers whose redundancy process ahead of losing their jobs at the end of October began last week.

And the Institute for Fiscal Studies think tank said that “many jobs” will be lost over the next few months, as the new scheme requires employers to pay 55 per cent of short-time workers’ wages, compared to no more than 20 per cent under furlough, while those unable to do any work - such as nightclub staff - will not be eligible. 

IFS director Paul Johnson said the new scheme was “significantly less generous than the furlough scheme it replaces”, as the chancellor was “trying to plot a difficult path between supporting viable jobs while not keeping people in jobs that will not be there once we emerge from the crisis.”

 Mr Sunak also announced an extension of the Self Employment Income Support Scheme and said that more than one million businesses will be granted flexibility in paying back loans.

And businesses in the hospitality and tourism sectors will also benefit from a 15 per cent VAT cut to 5 per cent for the coming months.

In order to qualify for the Job Support Scheme, in place from 1 November and due to run for six months, employees must be working at least one-third of normal hours and be paid as normal for that work by their employers.

The government and employers will then each pay one-third of wages for hours not worked, leaving staff with at least 77 per cent of their normal pay even if they only work one-third of the hours.

The state’s contribution will be capped at £697.92 per month for each worker, and employers are still able to claim the £1,000 one-off Jobs Retention Bonus for formerly furloughed staff who remain in post until at least February.

Meanwhile, the self-employed were offered a grant worth up to 20 per cent of average monthly profits for the period November to January, up to a total of £1,875, with further sums available to cover the following three months.

Up to half a million businesses which deferred VAT bills will be allowed to make interest-free payments over 11 months rather than handing over a lump sum in March. 

Self-assessment tax payments deferred from July, as well as those due in January, will not need to be paid until January 2022.

The chancellor said his primary goal was to support jobs, but told MPs that this could not include maintaining posts with no viable future under the coronavirus restrictions announced by Boris Johnson earlier this week.

He confirmed that the furlough scheme will be shut down as planned on 31 October.

“It is now clear - as the prime minister and our scientific advisers have said - that for at least the next six months, the virus and restrictions are going to be a fact of our lives,” said Mr Sunak.

“Our economy is now likely to undergo a more permanent adjustment. The sources of our economic growth and the kind of jobs we create will adept to the new normal and our plan needs to adapt in response.”

Acknowledging that large numbers of jobs will be lost with the withdrawal of the furlough, Mr Sunak said: “I can’t save every business, I can’t save every job. No chancellor could.”

Mr Sunak said it was everybody’s responsibility to defeat coronavirus as “the cost is paid by all”.

He told the Commons: “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 added: “The truth is 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.”

The measures gained a broadly positive welcome from business, with CBI director general Dame Carolyn Fairbairn saying they would “save hundreds of thousands of viable jobs this winter”.

But the TUC’s general secretary Frances O’Grady said: "This scheme will provide a lifeline for many firms with a viable future beyond the pandemic.   

 “But there’s still unfinished business. Unworked hours under the scheme must not be wasted. Ministers must work with business and unions to offer high-quality retraining, so workers are prepared for the future economy." 

British Chambers of Commerce director general Adam Marshall said Mr Sunak’s package would give the economy “an important shot in the arm”, but warned that the chancellor “must remain open to taking additional action to support parts of the economy facing unprecedented challenges over the months ahead”.

Manufacturers’ organisation Make UK said the measures would “help avoid the significant redundancies we were facing had there been a cliff-edge end to government support”.