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, the government has announced the new support scheme as new restrictions are implemented in response to the rising COVID infection rate.

Chancellor 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 pounds, far below the £2,200 per month of the Furlough scheme. Furthermore, workers will be required to work at least one-third of hours, which means businesses, like 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 the 31st of March rather than reverting to 20 per cent in January, hoping to help the still struggling hospitality industries.

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

“Almost 1 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.”

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