This afternoon, the Chancellor set out his Winter Economy Plan to support jobs and our economy as part of our planned response as we move into the next phase of tackling coronavirus in the UK.
Although economic performance is still a long way short of where we were in February, the green shoots of recovery are clear with three months of consecutive growth as millions of people move off furlough and back into work, with consumer confidence and spending returning.
However, the continued presence of the coronavirus is threatening that economic recovery and, with it now being the case that we will have to live with COVID-19 for months to come, I am pleased that the Chancellor has set out a plan that will focus on the problems currently facing businesses – different to those that we faced in March during complete lockdown – and will support viable jobs through a period of depressed demand.
Firstly, our landmark Job Support Scheme will directly fund businesses to protect these viable jobs and people’s wages, rather than laying employees off through a difficult winter.
Additionally, the Chancellor has announced a package of measures that – together – will minimise the strains on companies’ cashflows, allowing them to focus on supporting their employees and their jobs. The new Pay As You Grow scheme will cut Bounce Back Loan monthly repayments by almost half through an extension of the loan period to 10 years; we are extending our VAT cut to Spring 2021 which will support vulnerable hospitality and tourism businesses; and we are allowing companies to defer their VAT and tax liabilities for a further year.
The Job Support Scheme will allow companies to keep staff on at reduced hours, rather than making those employees redundant. An employee must be working for at least 1/3 of their normal hours, and the costs of the hours not worked are then split equally between the Government, the employer, and the employee. So, for instance, if an employee was working 40 per cent of their normal hours, the Government and employer would each contribute 20 per cent of the wages not worked, with the employee giving up the remaining 20 per cent of their salary but in the certain knowledge that their job was protected. The employee would therefore earn 80 per cent of their normal wage (40 per cent from the company for time worked, 20 per cent from the government for time not worked, and 20 per cent from their employer for time not worked).
All businesses are eligible to access the Job Support Scheme, although larger companies (not SMEs) will only be eligible if their revenue has declined. There will be restrictions on the ability of large companies to make dividend payments or similar to their shareholders, and employees retained under the scheme will not be permitted to be made redundant or given their notice whilst being supported. The scheme will open on 1 November and run for six months through to the end of April next year. Employers can use the Job Support Scheme as well as claim the Jobs Retention Bonus, meaning that if they bring back an employee who was on furlough, even on shorter hours, and they are still in post by January, the Government will help pay their wages during that period and provide a £1,000 bonus.
To ensure parity between employees and self-employed, the Government will also provide a grant extension for self-employed small businesses who used the existing SEISS scheme, and this will match the average grant of the Job Support Scheme, and represent 20 per cent of three month earnings, for November to January.
The Pay As You Grow scheme will provide greater flexibility in repayments for the one million small businesses who have benefitted from the Government’s loan schemes. All borrowers will now have the option to repay their Bounce Back Loans over a longer time period by extending the term of BBLs to ten years – this will reduce their average monthly repayments by almost half. On an average £30,000 loan, this reduces the monthly payment from £532 to £309. Businesses will also be able to move to interest-only repayments for periods of up to six months – or to pause repayments entirely for the same period. The Government will also enable CBILS lenders to extend their loans to ten years as well by extending the Government guarantee, providing more flexibility and support for businesses.
There will also be more time for businesses to access the range of loan schemes available. The Government is extending the deadline for new applications until the end of November for the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS), and the Future Fund. Along with the Bounce Back Loans, this means all four loan schemes will now expire at the end of November.
For the 150,000 businesses and 2.4 million jobs in hospitality and tourism, I was pleased that the Chancellor has announced that the temporary 5 per cent rate of VAT will be extended until the end of March 2021, rather than ending in January 2021 as originally planned.
Over half a million businesses have already benefitted from being able to defer Q2 2020 VAT payments until March 2021 – worth over £30 billion to over half a million businesses. However, it is important that businesses don’t face large bills for deferred VAT just as the economy is getting back on its feet, which is why I am also pleased that the Chancellor has launched a new scheme to give businesses who want it the extra time to pay back the VAT they owe in smaller equal monthly payments, interest-free, until the end of March 2022. On average, this means turning a one-off £60,000 payment into payments of less than £6,000.
The Chancellor has also announced that, for the 1.5 million businesses who pay through income tax self-assessment, the Government is upgrading its Time To Pay service so that all 11 million self-assessment taxpayers can create a 12-month payment arrangement for up to £30,000 each, extending the Self-Assessment Tax Deferral until the end of January 2022.
You can find more details of the Chancellor’s announcement here, and details on the Job Support Scheme - including what is covered by the grant, which employers and employees are eligible, and how to claim.
I very much welcome the steps that the Chancellor has taken today, and am pleased that they have the backing of both the Trades Union Congress, the Confederation of British Industry, the Federation of Small Businesses, and the British Chamber of Commerce.
These new measures will build on the enormous package of support – some £190 billion – that the Government has already provided to protect people’s jobs and livelihoods and to support businesses, and I am confident that this will help secure the green shoots of our continuing economic recovery, as part of the Government’s Plan for Jobs as set out initially in July.
As ever, please do not hesitate to contact me if I can provide any further information, or assistance, on any of these issues.