Today, the Chancellor set out the Government’s Winter Economic Plan. The Plan forms the next phase of the planned economic response to Coronavirus.
I agree with the Chancellor that there are reasons to be cautiously optimistic: three consecutive months of economic growth, millions of people who have moved off furlough and back into work, and the return of consumer spending.
However, increased cases of the virus threaten this recovery and it is right that the Chancellor has announced measures to support jobs and businesses.
Job Support Scheme
The Chancellor announced the launch of a new employment scheme- the Job Support 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, a third each way. The Scheme is focused on viable jobs, employees need to be working at least 33% of the time and this % will move up over time. The scheme will open from 1 November and run for six months until the end of April 2021.
The Scheme will be available for all businesses, not just those who used the furlough scheme. 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 of capital distributions to shareholders, and employees will not be able to be made redundant of given notice whilst on the scheme. Employers will be able to use the Job Support Scheme as well as the Jobs Retention Bonus.
The Chancellor has also announced that a further grant for self-employed small businesses who used the existing SEISS scheme. The grant will match the average grant of the Job Support Scheme and represent 20% of three months earnings from November to January.
More information about the Scheme can be found here: https://www.gov.uk/government/publications/job-support-scheme
Support for Business’ Cash Flow
The Chancellor has also announced measures to minimise the strain on companies’ cashflow:
- Pay As You Grow Scheme- The Chancellor recognises that many of the one million small businesses who have benefitted from the Government’s loan scheme have never borrowed finance before. Borrowers will 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. 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.
- Businesses have been given more time to access the Government’s range of loan schemes- The Chancellor announced that the deadline for new applications will be extended until the end of November for the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme and the Future Fund. This means all four loan schemes (including the Bounce Back Loans) will now expire at the end of November. The Government will work with businesses and lenders to introduce a new loan guarantee scheme from January 2021.
- Extending the temporary VAT cut for tourism and hospitality- The temporary 5% rate of VAT will be extended until the end of March 2021 to continue supporting the 150,000 businesses and 2.4 million jobs in tourism and hospitality.
- Deferring repayments of VAT to support businesses during this period- The Chancellor announced the launch of 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.
- More time for self-assessment businesses to pay back- The Government are upgrading the 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.
This package the Chancellor announced today builds on Government support already worth £190 billion.