Sunak announces new jobs scheme, extended VAT cut

UK: Chancellor Rishi Sunak announced the government’s replacement for the UK furlough scheme, which will support the wages of workers who cannot return to work full time.

The new Jobs Support Scheme will subsidise the pay of employees working lower hours, with those who can work a third of normal hours receiving 77 per cent of standard pay. 

The furlough scheme, introduced earlier this year, was intended to end in October, as many business restrictions were meant to be lifted. However, Sunak and the government have announced the support scheme as new restrictions are being implemented in response to the rising Covid infection rate.

Sunak said in his announcement: “The primary goal of our economic policy remains unchanged – to support people’s jobs – but the way we achieve that must evolve.” 

The government and businesses will split the cost of hours not worked, with the treasury providing a third of the total wages. Support will start in November and run for six months, with small and medium-sized businesses eligible for the scheme.

Grants given to companies will be capped at £700, far below the £2,200 per month being handed out for the furlough scheme. Furthermore, workers will be required to work at least one third of their usual hours, which means that businesses such as theatres and events companies which have not reopened yet will not be eligible for the scheme.

The government has also announced an extension of its support package for impacted sectors, in particular hospitality and tourism. The VAT cut to 5 per cent will remain until 31 March rather than reverting to 20 per cent in January, hoping to help the still struggling hospitality industries.

UKHospitality CEO Kate Nicholls said in a statement: “The announcement of flexible employee support is a move in the right direction, but hospitality needs more targeted efforts to support jobs.

“Almost one million people in our sector are still on furlough. We need Government to go further in hospitality, recognising the greater restrictions imposed upon us, and pick up the full cost of unworked hours. This would be a relatively low cost for a huge reward for our workforce,” she added.

The UK Short Term Accommodation Association [STAA] has responded to the Chancellor’s statement with an acknowledgement of the positive support he is delivering but with a warning that the tourism and hospitality sectors may need more targeted help in the coming months.

Merilee Karr, chair of the STAA, said: “We welcome the Chancellor’s acknowledgement that the tourism and hospitality sectors need extended support and the further help he is planning. Whilst the sector experienced a good August, September has seen a dampening of demand that we can expect to continue throughout autumn.

“Those hospitality businesses that have been impacted by lockdown and quarantine restrictions, especially during spring when millions of bookings were lost, will need more help.

“The Chancellor needs to consider the potential for further targeted business rates relief and / or grants for companies in the sector, which must include short-term rental companies, to ensure that they are able to prepare for a longer recovery period and to welcome visitors for many years to come,” she added.