Coronavirus Job Support Scheme: Rishi Sunak announces government will top up wages for people on reduced hours

  • Video report by ITV News Correspondent Richard Pallot

The government will top up the wages of people who are on reduced hours due to the coronavirus crisis in a bid to keep unemployment down, Chancellor Rishi Sunak has announced.

The new Coronavirus Job Support Scheme will "directly support" the wages of people in viable jobs who are working at least one-third of their normal hours.

Employers will continue to pay the wages of staff for the hours they work - but for the hours not worked, the government and the employer will each pay one third of their equivalent salary.

It means employees can be paid 77% of their wages by working 33% of their hours.

All small and medium-sized firms are eligible for the scheme, but big businesses will only be allowed use the support if they are losing income due to coronavirus.

Mr Sunak told MPs in a statement to the Commons that the new Jobs Support Scheme - which will run for six months - would allow businesses to keep employees in a job on shorter hours.

But in the Downing Street press conference that followed he admitted that people are still likely to lose their jobs, despite his package of measures.

He said: "Unemployment is already rising and will continue to rise - that's a complete tragedy. We've already lost 700,000 jobs. Those people's security is now under threat."

Political Editor Robert Peston on how it is impossible to know how many jobs this the scheme will save

"I can't promise that everyone can go back to the job that they used to have," he added.

He claimed the new measures provide a "very significant incentive for businesses to retain the staff that they have on furlough and bring them back".

"The government will directly support the wages of people in work, giving businesses who face depressed demand the option of keeping employees in a job on shorter hours rather than making them redundant," Mr Sunak said.

In order to support only viable jobs, employees must be working at least 33% of their usual hours and the government contribution will be capped at £697.92 per month.

To further support the hospitality and tourism industry, which are the most impacted by the latest coronavirus restrictions, Mr Sunak said the temporary 15% VAT cut will be extended to the end of March next year.

It means that businesses in the tourism and hospitality will only pay 5% VAT, rather than 20%.

Mr Sunak also said he was extending the self-employed grant on "similar terms" to the Jobs Support Scheme, which will start on November 1.

He also announced a "pay as you grow" scheme which will allow firms to repay their bounce back loans over a period of up to 10 years, reducing average monthly repayments on the average loan by almost half.

Bounce back loans, coronavirus business interruption loans, coronavirus large business interruption loans and the future fund will all be available until November 30.

How much will all of this cost, and how will it be paid for?

Chancellor Sunak admitted in his Downing Street press conference that it would be "very tricky to be precise" about how much the extra support would cost, but he gave an estimate.

  • Job Support Scheme: Around £300 million a month for each million employees involved

  • VAT cut for hospitality: Around £800 million on top of the existing £2.5 billion cost of the measure

  • Loan deferrals: Mr Sunak said this would be "complicated to cost"

The chancellor said the full costings would be published later in the autumn.

Asked how the package would be paid for, Mr Sunak said there would be "difficult" decisions to be made in the future.

The Chancellor said: "Over time and as the economy recovers we absolutely need to have an eye on our public finances and to make sure that we are in a strong and sustainable position."

He said decisions taken by previous chancellors - an apparent reference to the austerity measures since 2010 - had put the public finances in a position to allow him to act.

"That's what enabled me to react in this particular way, it reminds us of the importance of repairing public finances, having a strong economy, so that when problems like this come along you can throw a lot at them.

"But I will obviously have to make similar difficult decisions in the future as we get on a path back to sustainability, but right now the priority is supporting the economy, throwing everything we have got at protecting people's jobs and that's what I will continue to do."

Boris Johnson, who was not in the House of Commons chamber while the chancellor delivered his statement, said he fully supports the "creative and imaginative" measures.

Mr Johnson, who was visiting a police training facility in Northamptonshire, explained his absence, saying he was "setting out the vital collolery of those measures. They won't help unless everyone works together, we all work together to drive the virus down."

The new support was announced with just five weeks remaining before the furlough scheme is due to finish.

Mr Sunak said his goal remains "to support people's jobs" but added it would be "fundamentally wrong to hold people in jobs that only exist inside the furlough".

He acknowledged the new scheme is "different" to furlough because it involves the financial burden of coronavirus being shared by the state, the employer and the employee.

The Institute for Fiscal Studies think tank said the new Job Support Scheme was “significantly less generous” than the furlough system it replaces.

IFS director Paul Johnson said Mr Sunak is "trying to plot a difficult path between supporting viable jobs while not keeping people in jobs that will not be there once we emerge from the crisis".

“With employers now having to pay at least 55% of the normal wages of their employees it is clear that many jobs will be lost over the coming months.”

He added: “But it is significantly less generous than the furlough scheme it replaces, though remarkably the Chancellor provided no indication of the likely cost of the scheme.

The IFS suggested that the end of the furlough scheme will translate into “sharply rising unemployment” as jobs which relied on the state funding will cease to exist.

The Winter Economy Plan Credit: HMT

So far the government has paid the wages of nearly 12 million people and supported one million businesses.

It is estimated that almost 750,000 jobs have been lost in the UK during the coronavirus pandemic, despite the government spending more than £190 billion protecting the economy.

Mr Sunak announced the measures amid mounting pressure to extend financial support after the prime minister brought in a raft of coronavirus measures - including a curfew on pubs, restaurants and other hospitality businesses - which he said will be in place for six months.

Critics said the new restrictions, which are likely to have a huge impact on the hospitality, tourism and entertainment industry, should have been announced in tandem with extra support for the most effected businesses.

The chancellor cancelled this year’s Budget and is instead focusing on protecting millions of jobs in sectors hit by the latest Government guidance on Covid-19.

Watch Chancellor Rishi Sunak's statement in the Commons in full: