Chancellor Announces Winter Economic Plan to mixed reaction
The Chancellor of the Exchequer has announced a package of business and economic support measurers, the centrepiece of which is a new Job Support Scheme to replace the current Job Retention Scheme when it stops at the end of October. The Job Support Scheme is intended to protect “viable” jobs in businesses that are facing lower demand over the winter months due to coronavirus. It will run for six months, during which time the Government will contribute towards the wages of employees who are working fewer than normal hours due to decreased demand. The level of wage subsidy from the Government will be much smaller than the Furlough Scheme provides, while the contribution from the employer will be much higher. The Government’s contribution will be capped at just under £700 a month and it can only be claimed for staff who are working at least one third of their normal hours.
The other big measure that was announced was an extension of the Self Employed Income Support Scheme to provide further support for self-employed individuals who are continuing to trade but also face reduced demand. An initial grant, worth 20% of average monthly profits, up to a maximum of £1875, will cover the period from 1st November 2020 to 31st January. A second grant will be available to cover the period from February to the end of April, although the Treasury is not confirming what the value of this grant will be at this time.
Other measures announced were the extension of the VAT cut for the tourism and hospitality sectors until March 2021, additional time to pay VAT bills and longer repayment terms for Bounce Back Loans and Coronavirus Business Interruption Loans.
Commenting on the measures, Alan Mitchell, Chief Executive of Fife Chamber said: “Of course businesses welcome any additional financial support they can get to help them get through these difficult times and these measures could be the difference between survival and closure for some companies and the difference between employment and unemployment for some workers."
“But they don’t go far enough. Businesses who are prohibited from trading entirely because of by Covid regulations are earning no income and they will not be able to pay employee wages in those circumstances unless they have substantial cash reserves, and six months down the road from the original lockdown those reserves will be dwindling fast. Theatre jobs, for example, are perfectly “viable” if those theatres were allowed to open to paying customers. But they are not, because the four UK governments are not allowing them to. Most businesses that are able to open for trade are facing some restriction on their level of business activity, so will be generating substantially less income, while paying out a lot of money to make their operations Covid-safe. Their ability to retain staff, however much they want to, is also severely limited. Nor is deferring VAT payments much help to companies that aren’t earning money and generating any VAT liabilities."
“The other big flaw in the Chancellor’s Winter Plan is that it still offers no support to many people who were not eligible for help from the first tranche of support measures. For example, people who elect to take payment in the form of dividends rather than salary, which, of course, current tax laws allow them to do quite legally."
“With no apparent weakening in government resolve to put suppressing the spread of the virus before all other considerations, the likelihood is that large numbers of business failures and job losses are inevitable unless substantial extra business support is forthcoming. Those business and job losses will have profoundly damaging health and social consequences for years to come.”
Click here for further information on the ‘Winter Economy Plan’