• Today the Chancellor announced our Winter Economy Plan – the next phase of our planned economic response to coronavirus, following the Prime Minister’s address to the nation.
• We are focussing on dealing with the problems businesses face right now – supporting viable jobs through a time of depressed demand.

Despite the ongoing economic strain that the pandemic has imposed on the UK’s economy, there are reasons to be cautiously optimistic. Thanks to the Government’s comprehensive and generous response to the pandemic in March, we have seen three consecutive months of economic growth, millions of people have moved off the furlough and back to work, and consumer spending is returning. 

However, the resurgence of the virus threatens our recovery. Now it is clear we have to live with coronavirus for months to come, this means the economy cannot return to exactly as it looked in March and the economic rationale for the next phase of support must be different to that which came before.

That is why the Chancellor has announced new measures in the Government’s Winter Economy plan, such as the Job Support Scheme which directly funds businesses to protect these viable jobs and people’s wages, rather than laying employees off through a difficult winter. We have also acted to minimise the strains on companies’ cashflows so they can focus their resources on supporting employment. Pay as You Grow will cut Bounce Back loan repayments by almost half by extending the loans to 10 years, the extension to our temporary VAT cut to Spring 2021 will support vulnerable hospitality and tourism businesses, and our new payment plans will allow companies to defer VAT and tax liabilities for a further year.

Job Support Scheme

Now the economy is opening up, we should target support on those businesses that need it most: companies that have been impacted by coronavirus, helping them to keep staff on reduced hours rather than laying them off, and protecting people’s wages. Our aim is to protect viable jobs in businesses who are facing lower demand over the winter months due to coronavirus.

That is why we are launching a new employment scheme – the Job Support Scheme, as part of the Winter Economy Plan. In this new scheme the company will continue to pay its employee for time worked, but the burden of hours not worked will be shared equally between the employee, employer and Government – one third each way. The Scheme is focused on viable jobs, so employees need to be working at least a 33% of the time, and this % will move up over time.

To further explain how the new Job Support Scheme will work: If an employee was working 40% of the time, they would be paid for that in full by the employer. For the 60% not worked, the cost of hours would be split equally three ways – the government and employer will both contribute 20% of wages each, and the employee gives up 20% of wages and sees their job protected. The employee would therefore earn 80% of their normal wage (40% from the company for time worked, 20% from the government for time not worked, and 20% from their employer for time not worked).

The Job Support Scheme will open from 1 November, and run for six months until the end of April 2021. All businesses, not just those who used the furlough scheme, will be eligible for the new scheme. However, Larger businesses (not SMEs) will only be eligible if their revenue has declined. There will also be an expectation that large companies using the scheme will be constrained in their ability to make dividend payments or capital distributions to shareholders, and employees will not be able to be made redundant or given notice whilst on the scheme.

Employers now have three options: use the £1,000 Jobs Retention Bonus as a reward for bringing people back off furlough, bring people back on shorter hours and claim the wage subsidy under Job Support Scheme, or they can do both – if they bring back an employee who was on furlough, even on shorter hours, and they are still in post by January, we will help pay their wages during that period and provide a £1,000 bonus. Therefore, employers can use the Job Support Scheme as well as claim the Jobs Retention Bonus.

Why introduce the Job Support Scheme rather than just extending furlough?

Whilst furlough was the right intervention at the time, now the economy has reopened and the virus will be with us for a while our approach to economic support needs to evolve. Around the world, other countries are introducing similar part time working schemes like this (e.g France, Austria, Germany).

We need to focus on providing new opportunities for people and not pretend to people that there is always a job to go back to. That is why measures announced today in our Winter Economy Plan and our Plan for Jobs will help protect, create and support as many jobs as possible.

By requiring a minimum amount of time worked, the Job Support Scheme is focused on supporting genuinely viable jobs. The Job Support Scheme is targeted at businesses who really need it – large companies must be experiencing a decline in revenue due to depressed demand.

What about the self-employed?

The Government has also not forgot about the self-employed who are financially struggling due to the impact of coronavirus and will provide a grant extension for self-employed small businesses who used the existing SEISS scheme. Eligibility criteria will be refined to check whether the self-employed trader is still viable and trading and is suffering lower revenues as a result of coronavirus. The grant will match the average grant of the Job Support Scheme, and represent 20% of three month earnings, for to January.

Greater support for businesses’ cash flow

The Government recognises that the Job Support Scheme is not enough to support the wider economy in this delicate time of recovery. Therefore, the Government has announced a range of additional measures to assist businesses in the Winter Economy Plan.

Pay As You Grow

The Chancellor has announced greater flexibility for repaying loans through our new ‘Pay As You Grow’ scheme.

The Government recognises that many of the one million small businesses who have benefitted from our loan schemes have never borrowed finance before. That is why we want to give them greater flexibility to repay these loans over a longer period and in a way which suits their circumstances.

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. It will have no impact on a business’s credit rating if they take up any of those options. We will also allow CBILS lenders to extend their loans to ten years as well by extending our government guarantee, providing more flexibility and support for businesses. 

More time for businesses to access our range of loan schemes

Over 1 million businesses across the United Kingdom have already benefitted from over £57 billion through our business loan schemes. But we are giving them even more access to support by 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 our Bounce Back Loans, this means all four loan schemes will now expire at the end of November. We will work with businesses and lenders to introduce a new loan guarantee scheme from January 2021.

Extending our temporary VAT cut for tourism and hospitality

To continue supporting the 150,000 businesses and 2.4 million jobs in tourism and hospitality, we are extending the temporary 5 per cent rate of VAT until the end of March 2021. When we announced this in July, this was originally due to end in January 2021, but we recognise that the tourism and hospitality sector has been severely affected by coronavirus.

Deferring repayments of VAT to support businesses during this period

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. But we don’t want businesses to face large bills for deferred VAT just as the economy is getting back on its feet – which is why we are launching a new scheme to allow businesses who want 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 11 payments of less than £6,000.

More time for self-assessment businesses to pay back

Around 1.5 million businesses who pay through income tax self-assessment benefitted from our Self-Assessment Tax Deferral, deferring an estimated £6 billion to be paid in July 2020 to the end of January 2021. But to help them further, we are upgrading our Time To Pay service so that all 11 million self-assessment taxpayers will be able to create a 12-month payment arrangement for up to £30,000 each, and extended under the end of January 2022 – that’s an 18 month deferral.

Carolyn Fairbairn, Confederation of British Industry Director-General said:

“These bold steps from the Treasury will save tens of thousands of viable jobs this winter. It is right to target help on jobs with a future, but can only be part-time while demand remains flat. This is how skills and jobs can be preserved to enable a fast recovery. Wage support, tax deferrals and help for the self-employed will reduce the scarring effect of unnecessary job losses as the UK tackles the virus. Employers will apply the same spirit of creativity, seizing every opportunity to retrain and upskill their workers. The Chancellor has listened to evidence from business and acted decisively. It is this spirit of agility and collaboration that will help make 2021 a year of growth and renewal.”

For any more information on the Government’s Winter Economy Plan, including the full policy paper, please visit: https://www.gov.uk/government/topical-events/winter-economic-plan.