A further extension of the U.K. furlough scheme and higher grants for the self-employed will provide certainty for businesses “beyond the immediate shock of a four-week lockdown” in England, the British Chambers of Commerce said.
The coronavirus job retention scheme (CJRS), known as the furlough scheme, will be extended through March 2021. The next grant under the self-employment income support scheme (SEISS), for the three months to the end of January 2021, will be based on 80 percent rather than 55 percent of average profits, Chancellor of the Exchequer Rishi Sunak told members of Parliament as the lockdown began on November 5.
But reaction to the announcement was mixed. Paul Johnson, director of the Institute for Fiscal Studies, said he was taken aback by Sunak’s statement. “Basically, [a] return to March schemes (dreamt up on the hoof in 24 hrs) as if nothing learnt since,” he tweeted. “Wasteful & badly targeted for self-employed. No effort at targeting sectors/viable jobs for employees. Big contrast to position just days ago.”
The institute has described the SEISS as a blunt tool on the basis that the amount of the grant is unrelated to the amount of income that a person has lost.
The CJRS is now set to last 13 months, the Resolution Foundation noted. This is the inevitable result of the virus persisting for far longer than the government expected in the summer, and “reflects the challenge of trying to match economic policy to different lockdown restrictions across the U.K.’s nations and English regions,” it added.
“When the lockdown was announced, the prime minister said that furlough would be extended for a month, five hours before that scheme was due to end,” Labour’s Shadow Chancellor Anneliese Dodds said in response to Sunak’s statement. “Two days later, realizing that the self-employed had been forgotten, there was a last-minute change to the self-employment scheme. Now there are further changes — the chancellor’s fourth version of his winter economy plan in just six weeks. The chancellor can change his mind at the last minute, but businesses cannot.” (Prior coverage of the winter economy plan, announced September 24.)
Dodds told MPs there was “still nothing” in Sunak’s announcement for people who have been excluded from the government schemes.
The Liberal Democrats called for the furlough scheme to remain in place until June 2021. Christine Jardine, the party's Treasury spokesperson, said Sunak’s “knee-jerk reactions” had left “far too many wondering how they will put food on the table, rather than ensuring no one is left behind as he promised.”
“This latest intervention from the chancellor is bold and much needed,” said Mike Cherry, national chair of the Federation of Small Businesses.
“Extending the tried and trusted job retention scheme will give companies the certainty and stability they need to help safeguard thousands of jobs into March,” said Rain Newton-Smith, chief economist at the Confederation of British Industry. “Sectors and supply chains under the greatest strain may need more tailored support in the coming weeks.”
Outlook 'Remains Unusually Uncertain'
It is clear that the economic effects of public health restrictions to tackle the coronavirus pandemic are “much longer lasting for businesses than the duration of any restrictions,” Sunak said. “Extending furlough and increasing our support for the self-employed will protect millions of jobs and give people and businesses the certainty they need over what will be a difficult winter,” he added.
Sunak noted that the Bank of England’s monetary policy committee said earlier on November 5 that the United Kingdom’s economic recovery has slowed. The committee announced that a further £150 billion would be injected into the economy. Members had voted unanimously for the United Kingdom’s central bank to “increase the target stock of purchased U.K. government bonds by an additional £150 billion, financed by the issuance of central bank reserves, to take the total stock of government bond purchases to £875 billion,” it said in a release.
“The outlook for the economy remains unusually uncertain. It depends on the evolution of the pandemic and measures taken to protect public health, as well as the nature of, and transition to, the new trading arrangements between the European Union and the United Kingdom,” the committee added. (Prior Brexit coverage.)
Government Has ‘Acted With Speed’
The furlough scheme was initially extended to the end of November, but the government is “now going further so that support can be put in place for long enough to help businesses recover and get back on their feet — as well as giving them the certainty they need in coming months,” HM Treasury said in a November 5 release.
The CJRS extension will be reviewed in January to examine “whether the economic circumstances are improving enough” for employers to be asked to increase their contributions, Treasury said. In the meantime, employers will be asked to cover the cost of National Insurance and pension contributions.
“Throughout the pandemic, the government has acted with speed to protect lives and safeguard jobs with an unprecedented £200 billion support package,” Treasury said. “The furlough scheme has protected over 9 million jobs across the UK, and self-employed people have already received over £13 billion in support. This is in addition to billions of pounds in tax deferrals and grants for businesses.”
Treasury gave further details of the latest changes in an economic support fact sheet.
Sunak had announced on October 22 an increase in grants payable under the job support scheme that was set to replace the CJRS on November 1, and an increase from 20 percent to 40 percent in the rate of grants payable under the SEISS from November.
On October 31, as Prime Minister Boris Johnson announced England’s second lockdown, HM Treasury said the CJRS would continue until November 30.
Treasury then announced on November 2 that the SEISS would be made more generous for November, with self-employed individuals receiving 80 percent instead of 40 percent of their average trading profits. The grants would revert to 40 percent for December and January 2021, giving an effective rate of 55 percent of average profits over the three-month period.