Rishi Sunak: Chancellor announces new job support initiative after scrapping furlough

Rishi Sunak has unveiled his replacement for the furlough scheme but admitted “no chancellor” would be capable of saving every job and business.

Rishi Sunak has unveiled his replacement for the furlough scheme but admitted “no chancellor” would be capable of saving every job and business.

The UK government’s chancellor today unveiled his Winter Economy Plan and insisted there were reasons to be "cautiously optimistic".

Chancellor of the Exchequer Rishi Sunak during a virtual news conference in Downing Street. Picture: John Sibley/PA Wire

Boris Johnson and Mr Sunak had repeatedly refused to extend the furlough scheme, which saw 80% of people’s wages paid for by the Government.

With the scheme now scrapped, the Chancellor has unveiled the “next phase” of his economic plan with the “Jobs support scheme”.

Furloughed employees who go back to work for a third of their hours can have their wages subsidised for the next six months.

It will see workers get 77% of their normal pay for working just 33% of their hours, as the furlough scheme that has supported nine million people since March is axed.

Mr Sunak explained to MPs: “It will support viable jobs. To make sure of that employees must work at least a third of their normal hours and be paid for that work as normal by their employer.

“The Government, together with employers, will then increase those people’s wages covering two-thirds of the pay they have lost by reducing their working hours, and the employee will keep their job.

“We will target support at firms who need it the most. All small and medium-sized businesses are eligible but larger businesses only when their turnover has fallen through the crisis.”

The scheme will be open to employers across the United Kingdom regardless of whether they previously used the furlough scheme.

It will cost the Treasury an estimated £300million a month for every million workers.

Announcing a series of new support packages, Mr Sunak admitted the economy was now likely to “undergo a more permanent adjustment”.

He explained: “The sources of our economic growth and the kinds of jobs we create will adapt to the new normal.

“We need to create new opportunities and allow the economy to move forward.

“I cannot save every business. I cannot save every job. No chancellor could. But what we can and must do is deal with the real problems employees and businesses are facing now.”

Mr Sunak also announced the temporary reduction of VAT rates from 20% to 5% will remain until March 31 2021.

He said: “The final step I’m taking today will support two of the most affected sectors, hospitality and tourism.

“On current plans, their VAT rates will increase from 5% back to the standard rate of 20% on January 13.

“So to support more than 150,000 businesses and help protect 2.4 million jobs through the winter, I’m announcing today that we are cancelling the planned increase and will keep the lower 5% VAT rate until March 31 next year.”

The Chancellor also announced coronavirus emergency loans for businesses would be extended until the end of the year.

Loans can now be repaid over ten years in a new “Pay as you Grow” scheme.

The new measures were dismissed by the SNP economic spokeswoman Alison Thewliss who claimed it left three million people without any support.

She said: “There’s nothing here, nothing whatsoever, for those that have been excluded from existing support schemes.

“The freelancers, the ‘forgotten limited’, the PAYE, the new starters, the women on maternity, all of those who have not one penny piece from this government for six months.

“He cannot say he does not know this is a problem although he still refuses to meet with them.

“How dare he say these three million people should be left high and dry with nothing.”

Labour's shadow chancellor Annelisese Dodds backed the measures, but claimed it came too late for many.

She said: “I welcome the Chancellor's eleventh-hour decision to finally abandon his furlough cliff edge, but this U-turn will be too late for too many workers.

“Never again should the Government wait until the last possible moment when millions of jobs and livelihoods are at stake.”

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