Pub and restaurant bosses today welcomed Rishi Sunak‘s ‘new furlough scheme’ to help those in the hospitality sector – as others warned it will still be a tough winter for many.
The Chancellor has unveiled yet another bailout in a bid to boost support for stricken businesses under Tier Two lockdown and the self-employed.
In crucial changes to the Job Support Scheme, the Government will now cover more of the cost of staff on reduced hours, with just a five per cent contribution required from employers rather than 33 per cent.
Businesses in ‘high risk’ Tier Two areas will also be eligible for grants of up to £2,100 a month, with the move backdated to ward off criticism from northern hotspots that have been under restrictions for months.
Speaking in the Commons today, Mr Sunak said 150,000 businesses across England could benefit from the move, with the costs potentially hitting £1billion.
The package for the self-employed has also been scaled up, with grants increased from 20 per cent to 40 per cent of average profits until April – meaning the maximum quarterly payment will now be £3,750.
Business bosses today welcomed the latest bailout, with Dame Carolyn Fairbairn, the Confederation of British Industry’s director-general, dubbing the scheme ‘a welcome and much-needed successor to the furlough scheme.’
Rishi Sunak (pictured today) has unveiled another bailout worth billions of pounds in a bid to boost support for stricken businesses under Tier Two lockdown and the self-employed
While businesses forced to close in the harshest Tier Three areas can access significant funding, there is less available for ‘high risk’ Tier Two regions such as London and Essex – even though the ban on households mixing indoors means that many are getting hammered
She added: ‘It’s right that businesses contribute if they wish to access this scheme.
‘But with a tough winter ahead, significantly increased Government contributions to non-worked hours across all regions will do even more to protect people’s livelihoods.’
Ms Fairbairn added the ‘missing middle of pubs, cafes and theatres in Tier Two along with other businesses across the UK who are seeing demand fall away, but with little extra support, will be relieved to see that anomaly come to an end.’
Rishi’s new bailout
- Firms in Tier 2 lockdown eligible for £2,100-a-month grants, potentially benefiting 150,000 businesses. If there is full take-up it could cost £1billion.
- Job Support Scheme changed so employers pay just 5 per cent of unworked hours – down from a third – and the minimum threshold for hours worked will be one day a week instead of 33 per cent. The Treasury said the costs were unclear because JSS will be ‘demand led’ but it will be ‘in the billions’.
- Self-employed grants increased to cover 40 per cent of average profits, with maximum rising from £1,875 to £3,750. Officials said the grants are expected to cost £3.1billion up to January – and could be twice that if the higher rate is maintained to April.
‘This is a big step towards a more standardised approach of support for areas going into tiers two and three and those businesses that face tough times who operate within them,’ she added.
While businesses forced to close in the harshest Tier Three areas can access significant funding, there has been less available for ‘high risk’ Tier Two regions such as London and Essex – even though the ban on households mixing indoors means that many are getting hammered.
Tory MPs have been increasingly alarmed at the gap, amid warnings that the crisis is set to drag on well into next year.
Shocking official figures today show that 17 per cent of firms in the accommodation and food services industry are at ‘severe’ risk of becoming insolvent.
Business leaders today praised Mr Sunak’s bailout as ‘a very significant improvement in the support available to businesses struggling with the impact of increasing restrictions across the UK.’
A British Chambers of Commerce spokesman added: ‘Chambers have been campaigning for greater support for businesses experiencing big falls in demand as a result of new restrictions, and a number of the steps announced today, including the lowering of employer contributions and the number of hours worked needed to qualify for the scheme, respond directly to our calls.
‘Backdated grants for hospitality firms in tier two and enhanced grants for the self-employed will go some way to alleviating pressure on many of those who have been particularly vulnerable to the economic impact of the pandemic.’
Rebecca McDonald, Senior Economist at the Joseph Rowntree Foundation, said: ‘Holding back the coming wave of unemployment is no easy task and it is right that the Chancellor has taken steps to protect more jobs and correct the shortcomings in the Winter Economic Plan – boosting the grants and support available to businesses, workers and the self-employed.
‘With four million workers in poverty before coronavirus, we can’t expect people to stay afloat on an ever-smaller fraction of their existing income when their costs have not changed.
‘It’s right that more support will now be available for people working in businesses affected by a loss of demand rather than just forced closures, but that needs to be enough for workers and their families to keep the roof over their head and food on the table through a very difficult winter.’
In a dramatic Commons statement, the Chancellor boosted support for sectors like hospitality after a wave of anger at ‘loopholes’ in his existing provision. Mr Sunak (right) and Robert Jenrick (left) hosted a roundtable with business leaders this morning before the announcement
The Government has been laying out huge sums on the coronavirus response while tax revenues have nosedived
Another £36.1billion was borrowed in September – the third-highest month on record and compared to just £7billion a year ago – as tax revenues slumped and the Treasury poured out bailout money
Paul Johnson, director of the Institute for Fiscal Studies, tweeted: ‘Very big change to Job Support Scheme. To keep employees in jobs firms now need to pay 20 per cent for time they work plus five per cent on top, with government covering 75 per cent.
‘Under scheme announced last month government covered just 45 per cent. This changes incentives to keep people on a lot.
‘Again, though, it is very odd to have such a big announcement without, so far as I can see, any information on expected cost.’
Jonathan Geldart, director general of the Institute of Directors, also welcomed the scheme, adding: ‘The new and improved jobs support scheme is to be welcomed, and should go some way to easing company directors’ fears.
‘A substantial reduction in the employer contribution is a crucial step, reflecting our members’ concerns.
‘Taking a national approach will help to cut through the confusion of different tiering systems and backroom political negotiations.’
However, others have warned the ‘sad reality’ is that thousands of businesses are likely to close over the winter ‘whatever financial support packages the Chancellor offers up.’
Business bosses today welcomed the latest bailout, with Dame Carolyn Fairbairn (pictured), the Confederation of British Industry’s director-general, dubbing the scheme ‘a welcome and much-needed successor to the furlough scheme’
Jonathan Geldart (left), director general of the Institute of Directors, also welcomed the scheme. Pictured right: Aude Barral, co-founder of developer recruitment platform CodinGame
Aude Barral, co-founder of developer recruitment platform CodinGame, added: ‘The Government needs to recognise how important reskilling and retraining is going to be in helping the country get back on its feet as quickly as possible.
‘The hospitality, tourism and retail sectors have been decimated by the pandemic, but there are sectors such as technology that have huge employment potential.
‘There needs to be significantly more investment in retraining for the future, opening up these sectors to people who have transferable skills and are keen to get back to work.’
Other business owners agreed that the Government support is welcome, but insisted ‘this isn’t enough to help us if they still keep in place the same restrictions.’
Mark Dogan, 50, who runs Gizel kebab shop in Clapham, told MailOnline: ‘Everyone having to leave pubs before 10pm means we get no business then. This isn’t enough.
Pictured: Paul Johnson, director of the Institute for Fiscal Studies
‘And what are the details. Will they pay every week or only each month? So yes, I’ll take it, but they’re not doing enough to help.’
Malik Ahmed, a waiter at Argan restaurant by Clapham Common, was also critical of the new scheme, under which wages can be topped up to 77 per cent of the normal figure.
He said: ‘We live in London, even with 100 percent of our wages we still can’t cover all our bills.
‘Now we are getting even less, so how am I going to afford rent, travel and all those other costs?
‘This programme assumes that everyone has savings, but many don’t. We are really struggling at the moment, business is dead because of all the restrictions.
‘Look around, its lunch and there’s hardly anyone here because customers are staying away. We need the restrictions gone now – we want to work hard and earn our full wages.’
Announcing the latest bailout in the Commons today, Mr Sunak said he had listened to industry leaders and recognised that ‘open but struggling businesses require further support’.
‘Their message was clear – the impact of the health restrictions on their businesses is worse than they hoped,’ he said.
The Chancellor admitted that he could not give any precise figures for the overall bill, saying the schemes were ‘demand led’.
But it appears the announcements today mean £13billion more spending by the government over the next six months – on top of more than £200billion already splurged to prop up the economy.
Mark Dogan, 50, who runs Gizel kebab shop in Clapham, told MailOnline: ‘Everyone having to leave pubs before 10pm means we get no business then. This isn’t enough’
Malik Ahmed, a waiter at Argan restaurant by Clapham Common, was also critical of the new scheme, under which wages can be topped up to 77 per cent of the normal figure
They will fuel alarm at the spiralling outlay after it emerged the government has borrowed more than a billion pounds every day during the pandemic so far.
Firms forced to close in Tier Three, such as betting shops and soft play centres, will be able to furlough their workers on two-thirds of wages.
But there has been an outcry from hospitality firms in Tier Two, whose business models have been wrecked by restrictions that mean people can no longer meet socially indoors.
Tier Two restrictions now cover many of the most heavily populated parts of the country, including London, Birmingham, York, Essex and the North East.
Under the Jobs Support Scheme (JSS), which officially launches from November 1, staff can have their wages topped up to 77 per cent of normal.
The state and employer each fund 50 per cent of the cost of hours not worked. But critics have warned that the scheme gives too little incentive to firms to retain staff.
But Mr Sunak cut the cost of the employer’s contribution, with the state picking up more of the bill.
The Treasury has modelled costings of £1billion per month for every two million people on the scheme.
That would give a £6billion cost over the next six months, although much of that money was already committed.
However, the bill could rise dramatically if more people sign up.
Mr Sunak also increased the amount of profits covered by the forthcoming self-employed grant from 20 per cent to 40 per cent, meaning the maximum grant will increase from £1,875 to £3,750.
That means a ‘further’ £3.1bn of support to the self-employed between November to January alone, according to the Treasury.
If the next grant covering February to April is kept at the higher rate that would be roughly the same again.