Published on September 24th, 2020 | by The GC Team0
Chancellor ditches Budget for “short-term” plan
With the furlough scheme due to end in October and businesses anxious about rapidly rising COVID infections, tighter social restrictions, increasing local lockdowns and the approach of the dangerous winter season, Chancellor Rishi Sunak has – probably quite sensibly – opted to abandon his Autumn Budget in favour of a Winter Economy Plan – a set of shorter-term economic measures meant to extend job protection and reassure the business community. It includes plans for a job support scheme to replace furlough, help for the self employed, business loans and VAT cuts.
In outlining the new measures, Mr Sunak admitted he can’t promise to save all jobs or all businesses, and that some will become “unviable” in a changed, “new normal” future.
The new Job Support Scheme – open to all SMEs, and to larger businesses whose turnover has fallen during the COVID crisis – will run for six months from November 2020, and shifts the emphasis away from “paying people to do no work”, and towards supplementing pay for employees who do work for at least a third of their normal (pre-COVID) hours. In essence, employers will pay workers for the actual hours they work, and the Government and the employer will each pay a third for the hours they don’t work. It is a bit more complicated than furlough, and puts more demand on employers’ finances. To boil it down, someone working a third of their normal hours would receive 77% of their full-time pay. The scheme is capped at £697.92 per month, and means the Government is paying 22% of an employee’s pay, compared to 80% at the start of the furlough scheme.
Bounce Back Loans taken on by businesses under the Government scheme will be extended from six to 10 years, and Coronavirus Business Interruption Loan Scheme lenders will also be able to extend the length of loans from the current maximum of six years to 10 years. Deadlines for coronavirus loan schemes have been extended to the end of November, and businesses having difficulty can opt to make interest-only payments for six months. Those under severe financial pressure can apply to suspend repayments altogether for six months without, says Mr Sunak, affecting the business’s credit rating.
Commenting on the Chancellor’s announcement, Nic Redfern, Finance Director of KnowYourMoney.co.uk, said: “By cancelling the Budget to focus on short-term measures, the Government has signalled it is still very much in crisis mode. But, at the same time, it has reaffirmed its commitment to help UK businesses through the pandemic by regularly extending, reforming and creating financial support schemes.
“Until Covid-19 is brought under control, and fears of a second, third and even fourth spike dissipate, the private sector is going to have to get used to the Government’s short-term thinking. This brings problems – most notably, many businesses will not invest or hire new people while such uncertainty remains – but trying to implement long-term economic policies right now would be extremely difficult. For now, business leaders must set about making their own longer-term plans for surviving the crisis and trust that, if needed, the Government will provide safety nets to support them.”