The UK chancellor Rishi Sunak has unveiled a “radical” new package of support for the UK economy, including new income grant schemes, more business loan funding and tax cuts.
Sunak confirmed he had ditched plans for an autumn budget, instead setting out a string of contingency plans on Thursday to urgently shore up the economy with both infection rates and job losses rising.
The “Winter Economy Plan” unveiled by the finance minister in parliament included:
A six-month “jobs support scheme” from November, with wage subsidies for workers in “viable” jobs, as long as they work and are paid as normal for at least a third of their usual hours. The government will cover two-thirds of pay lost through shorter hours.
New grants for self-employed workers, on “similar” conditions to the jobs support scheme.
An extension of UK government business loan schemes, managed by banks, as the coronavirus crisis continues to wreak havoc for firms. Bounce back loans can be extended from six to 10 years, the coronavirus business interruption loan schemes (CBILs) guarantee will also rise to 10 years, and deadlines will be extended for all four major schemes.
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Sunak said there were reasons to be “optimistic” despite firms’ woes given three months of GDP growth, but acknowledged the resurgent virus posed a “threat to this fragile economic recovery.”
He defended replacing the furlough scheme, saying there was “no harder choice” than to end the scheme but defended supporting “viable” jobs through the new measures.
“Our economy is now likely to undergo a more permanent adjustment,” he warned. “The sources of our economic growth and the kind of job we create will adapt and evolve to the new normal. And our plan needs to adapt and evolve in response.
“It is fundamentally wrong to hold people in jobs that only exist inside the furlough.”
Sunak also told MPs: “I cannot save every business. I cannot save every job. No chancellor could.”
He had facing a clamour from firms, unions and Labour to extend or replace the furlough scheme currently safeguarding around 12% of jobs. Germany, France, and other European economies have already introduced similar measures.
“These are radical interventions in the UK labour market, policies we have never tried in this country before.”
More than £58bn ($74bn) in business loans had already been approved for firms, including more than 1.2 million ‘bounce back’ loans worth £38bn which enjoy full government guarantees and no interest for a year.
But the chancellor had faced fresh pressure to act swiftly in recent weeks as UK coronavirus cases have leapt, more regional lockdowns and now tighter national restrictions have been imposed.
“No-one wanted to be in this situation but we need to respond to it,” a Treasury source told Yahoo Finance UK ahead of the announcement. Officials are understood to have been weighing up trade-offs between short-term protection measures and efforts to rebuild the economy long-term, and between protecting existing jobs and providing more support finding new ones.
Business chiefs warned millions of jobs and many firms’ survival was at stake earlier this week after prime minister Boris Johnson and the leaders of devolved administrations announced tougher restrictions.
The Confederation of British Industry’s director-general warned measures including a 10pm shutdown for hospitality firms and encouraging home-working would be a “crushing blow” for thousands of companies. She had called for a “successor” for the job protection scheme.
Video: “Rishi Sunak unveils Job Support Scheme to prevent redundancy in winter months” (Evening Standard)