Sunak’s new emergency lifeline for jobs aimed at supporting viable businesses

Rishi Sunak has announced a new range of measures to keep people in work once the furlough scheme ends, after being forced to abandon a planned autumn budget by the reimposition of coronavirus restrictions. In a statement to the Commons, the Chancellor said: “The resurgence of the virus, and the measures we need to take in response, pose a threat to this fragile economic recovery. So now our task is to move to the next stage of our economic plan, nurturing the recovery by protecting jobs through the difficult winter months.”

A “Jobs Support Scheme” will replace the furlough scheme from November. It will continue to top up the wages of workers whose businesses are struggling to pay the full amount, but on significantly less generous terms as the furlough scheme.

The new scheme will only be available to “viable” businesses. This tackles one of the main criticisms of furlough – that it supports jobs which will be lost in any case due to the long-term restructuring of the economy. Jobs Support recipients will have to work for at least 33% of their usual hours, with businesses covering the pro-rata salary and splitting the remaining 66% of hours with government funds.

The scheme will also be targeted at small and medium-sized businesses, with larger firms having to prove that their revenue has fallen significantly through the crisis to be eligible for funds.

Sunak also announced a range of candy-offers to businesses that have thus far survived the economic downturn. Bounce Back Loans can now be extended from six to ten years, nearly halving the average monthly repayment, and businesses that are really struggling can choose to make interest-only payments. In a last-ditch effort, the loan repayments can be suspended altogether for six months.

The terms of other loans schemes will also change, with government guarantees for Coronavirus Business Interruption Loans being extended for up to ten years, allowing banks to extend repayment deadlines. And the deadline for deferred VAT bills – worth more than £30 billion to the exchequer – will be extended by 12 months from March 2021, allowing businesses to spread the bill over 11 smaller repayments without interest.

Finally, and crucially for the hospitality industry, the cut to VAT for hospitality and tourism will remain until March 31st next year. It was originally due to rise back from 5% to 20% in January.

This statement was a crystallising moment for economic observers. Sunak’s objective is no longer to protect as many jobs as possible, but to protect only those which will be viable in the post-coronavirus economy. The Treasury has accepted that there will be long-term economic dislocation, with millions of jobs lost in the process, and wants the job market to adapt now rather than delaying the pain to a later point.

Businesses that have survived up to this point will be cushioned as we head into another treacherous period. But those which lie in suspended animation – and their employees – will be taken off life support.

Thus, unemployment is still expected to rise by millions in the coming months.