Sunak announces Winter Economy Plan
Chancellor Rishi Sunak has laid out the government’s Winter Economy Plan, as fears grow about how a second wave of coronavirus will affect jobs, businesses and people’s finances.
Delivering a speech in Parliament, he said: “The resurgence of the virus, and the measures we need to take in response, pose a threat to our fragile economic recovery. Our approach to the next phase of support must be different to that which came before.
“The primary goal of our economic policy remains unchanged – to support people’s jobs – but the way we achieve that must evolve.”
Jobs support scheme
As rumoured yesterday a new ‘jobs support scheme’ beginning on 1 November will subsidise the wages of people in work. Businesses will have the option of keeping employees in a job on shorter hours, rather than making them redundant.
Sunak said the scheme will support “viable jobs” so employees must be working a third of their normal hours and be paid for that work, as normal, by their employer.
The government will cover two thirds of the pay employees have lost due to reduced working hours. Anyone who was employed as yesterday is employed is eligible.
The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.
The scheme will run from November to April, and all small and medium-sized businesses are eligible to apply. However, larger businesses can only apply if their turnover has fallen. Businesses are eligible even if they haven’t previously furloughed employees.
Employers retaining furloughed staff on shorter hours can claim both the Jobs Support Scheme and the Jobs Retention Bonus.
VAT rise cancelled
Sunak also announced that he was cancelling the planned increase in VAT for hospitality and tourism. The rate was due to rise from 5% to 20% on 13 January 2021.
The lower 5% VAT rate will now remain in place until 31 March 2021.
The chancellor said the move would support more than 150,000 businesses and protect 2.4 million jobs through the winter and give businesses in the sector the confidence “to maintain staff as they adapt to a new trading environment”.
In addition, up to half a million business who deferred their VAT bills will be given more breathing space through a New Payment Scheme, which gives them the option to pay their VAT bill in smaller instalments.
Rather than paying a lump sum in full at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.
Paying self-assessment tax
About 11 million self-assessment taxpayers will be able to benefit from a separate additional 12-month extension from HMRC on the Time to Pay self-service facility.
This means tax payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.
Businesses which took out a Bounce Back Loan will have more flexibility about paying it back due to a new Pay as You Grow repayment system.
Loans can be extended from six to 10 years, almost halving repayments. Interest-only payments can be made, and firms deemed “in trouble” can suspend payments altogether for up to six months.
The chancellor also announced he would be extending applications for the government’s coronavirus loan schemes until the end of November.
Sunak also said that the government was starting work on a new, successor loan programme, set to begin in January.
Sunak also announced that he was extending the existing self-employed income support scheme (SEISS) “on similar terms and conditions as the new Jobs Support Scheme”.
An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus.
The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year. This will be worth 20% of average monthly profits, up to a total of £1,875.
An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April.