Rishi Sunak sets out new measures and tapered furlough scheme to avoid mass unemployment

Rishi Sunak

Rishi Sunak has set out plans to stave off mass joblessness in Britain, extending a £6.8bn support package for the self-employed and confirming massive wage subsidies for employees until the end of October.

The chancellor said the package of measures, that are more generous than had been expected, will act as a “lifeline” for millions of jobs and businesses blighted by the coronavirus lockdown, as ministers pin hopes on an economic upturn in the autumn.

Boris Johnson is discussing with ministers a big job creation scheme, possibly to be announced before the summer break, focusing on upgrading infrastructure.

“We are trying to identify shovel-ready projects — we want to get a move on with this,” said one minister. Transport projects and environmental schemes are among the priorities.

Unemployment could rise by 2m due to the coronavirus crisis, according to the independent Office for Budget Responsibility, and has become a major focus for Mr Johnson. Gavin Williamson, education secretary, is drawing up a skills package to retrain workers, particularly the young.

The Treasury is planning a Budget in the autumn but government officials have not excluded the possibility of a pre-summer economic statement, setting out the second phase of the government’s economic response to the crisis.

Mr Sunak on Friday announced what are expected to be the final stages of his emergency support package for the jobs market. By the autumn, as state subsidies are withdrawn, the true scale of the unemployment crisis will become clearer.

The chancellor announced that the self-employment income support scheme — which has so far cost £6.8m and has covered lost trading profits of up to £2,500 a month for three months — would be extended to cover another three months.

There have so far been 2.3m claims under the scheme. Mr Sunak announced those eligible would be able to claim a second and final grant in August, capped at £6,750 in total, a cut in support to 70 per cent of profits.

The extended support for the self-employed is more generous than some expected — until Friday Mr Sunak had not committed to continuing the scheme at all — and reflected the chancellor’s concerns about the continuing malaise in the economy.

Mr Sunak also revealed details of how he will operate the final stages of the job retention scheme for furloughed workers — which has helped protect 8.4m jobs with 1m employers — which will be wound up at the end of October.

The scheme will be made more flexible to allow furloughed workers to be brought back part-time in July, while a new taper will mean that employers will only have to make initially modest contributions to the cost of the scheme from August 1.

Under the scheme, which pays 80 per cent of wages of furloughed staff, employers will gradually pick up more of the wage bill from August 1, starting with employer national insurance contributions and pension contributions — for the average employer this would amount to 5 per cent of employment costs.

By October the government would pay 60 per cent of wages up to a cap of £1,875. The Treasury said the scheme would end on October 31 and would not be extended.

Mr Sunak said: “Our top priority has always been to support people, protect jobs and businesses through this crisis. The furlough and self-employment schemes have been a lifeline for millions of people and businesses.”

However not all feel that the Chancellor has gone far enough with, Clive Wratten, CEO of the Business Travel Association, saying: A blanket change to the UK’s furlough scheme will not be felt equally across the economy. It’s well-known that the aviation, travel, hospitality and events sectors are on their knees. Even the scaled scheme announced will put several long-standing companies out of business – swiftly. Many, many jobs across our sector will be lost.

These furlough changes come hot on the heels of the 14-day quarantine announcement which dramatically setback any future travel bookings.

We therefore urge the Chancellor to think again about the sectors which need further help from now and beyond October 2020. Judicious exemptions are needed to help save jobs and protect sectors that cannot operate under today’s conditions.”

Jack Izzard, director of the The Great British Bounceback, a new community of small and micro businesses seeking to rebound from the Covid-19 pandemic, commented on the announcement saying: “With the flexible furlough scheme the Government is coaxing UK businesses to hand back the crutch rather than rip it away from them.

“When the furlough scheme is ultimately unwound, the sad reality is that thousands of businesses will unravel, but the flexible furlough scheme is the Treasury’s best shot at minimising the economic damage.

“The world is a different place now and however delicate the Government’s approach in tapering away the support businesses are receiving, when the monetary stabilisers are taken off a lot of firms will not be able to stay upright. The demand and volumes just won’t be there.

“But if they are anything, the UK’s businesses are agile and able to adapt. Survival is fundamental to the average small company’s DNA.

“Whether it’s creating a new business to serve a new market or pivoting an existing company to meet a new need, the trauma of the Covid-19 crisis is also providing a crucible of business creativity.

“Not all these businesses will succeed, but those that do will be led by people who go on to play a key role in the New Normal. Seldom has Government support been so well spent.”