- Today, the Chancellor has announced our Winter Economy Plan – the next phase of our planned economic response to coronavirus, following the Prime Minister’s address to the nation.
- There are reasons to be cautiously optimistic: thanks to our comprehensive and generous response in March, we have seen three consecutive month of economic growth, millions of people have moved off the furlough and back to work, and consumer spending is returning.
- But the resurgence of the virus threatens our recovery. Now it is clear we have to live with coronavirus for months to come, this means the economy cannot return to exactly as it looked in March and the economic rationale for the next phase of support must be different to that which came before.
- So today, we are focussing on dealing with the problems businesses face right now – supporting viable jobs through a time of depressed demand:
- Our Job Support Scheme directly funds businesses to protect these viable jobs and people’s wages, rather than laying employees off through a difficult winter.
- We have also acted to minimise the strains on companies’ cashflows so they can focus their resources on supporting employment. Pay as You Grow will cut Bounce Back loan repayments by almost half by extending the loans to 10 years, the extension to our temporary VAT cut to Spring 2021 will support vulnerable hospitality and tourism businesses, and our new payment plans will allow companies to defer VAT and tax liabilities for a further year.
- As part of the package, the government also announced it will extend the temporary 15% VAT cut for the tourism and hospitality sectors to the end of March next year. This will give businesses in the sector - which has been severely impacted by the pandemic - the confidence to maintain staff as they adapt to a new trading environment.
Job Support Scheme
The new Job Support Scheme will be introduced from 1 November to protect jobs, where businesses are facing lower demand over the winter months due to coronavirus. Under the scheme, which will run for six months, the government will contribute towards the wages of employees who are working fewer than normal hours due to decreased demand. 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. This means that employees will be paid at least two thirds of their salary per hour for every hour not worked.
Employees must be working at least 33% of their usual hours and the level of grant will be calculated based on an employee’s usual salary, capped at £697.92 per month.
To be eligible to apply for the grant, employees must:
- be registered on PAYE payroll on or before 23 September 2020
- work at least 33% of their usual hours during the first three months. This level of hours will be reviewed by the Government at a later date for the remaining months.
The Job Support Scheme will be open to businesses across the UK even if they have not previously used the Job Retention Scheme, with further guidance being published soon. Employers must pay at least two thirds of employees’ salary for every hour not worked. Employers will need to fund the difference between this and the grant and pay National Insurance and pension contributions from their own funds.
Claims will open in December and grants will be paid on a monthly basis from this date.
The scheme is designed to sit alongside the Jobs Retention Bonus. Businesses can benefit from both schemes in order to help protect viable jobs.
More information is available on GOV.UK
Pay As You Grow
The burden will be lifted on more than a million businesses who took out a Bounce Back Loan through a new Pay as You Grow flexible repayment system. This will provide flexibility for firms repaying a Bounce Back Loan.
This includes extending the length of the loan from six years to ten, which will cut monthly repayments by nearly half. Interest-only periods of up to six months and payment holidays will also be available to businesses. These measures will further protect jobs by helping businesses recover from the pandemic.
The Government also intend to give Coronavirus Business Interruption Loan Scheme lenders the ability to extend the length of loans from a maximum of six years to ten years if it will help businesses to repay the loan.
In addition, the Chancellor also announced he would be extending applications for the government’s coronavirus loan schemes that are helping over a million businesses until the end of November. As a result, more businesses will now be able to benefit from the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce Back Loan Scheme and the Future Fund. This change aligns all the end dates of these schemes, ensuring that there is further support in place for those firms who need it.
VAT Deferral New Payment Scheme
The Chancellor reiterated that we don’t want businesses to face large bills for their deferred VAT just as the economy is recovering. The New Payment Scheme will help businesses pay their deferred VAT.
All deferred VAT was due to be paid at the end of March 2021. Businesses will be able to make 11 interest free smaller repayments in the 12 months to 31 March 2022. This will benefit up to half a million businesses – on average turning a one-off £60k payment in March, into 11 payments of less than £6k.
For those that opt-in, this means that their VAT liabilities due between 20 March and 30 June 2020, will now need to be paid by end March 2022. Giving businesses the option to defer VAT has been a success: over half a million businesses deferred their VAT payments, a cash injection of around £30bn into the UK economy when it needed it most.
The Chancellor announced to the House: "I'm announcing today the new Jobs Support Scheme. 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."
"I am extending the existing self-employed grant on similar terms and conditions as the new Jobs Support Scheme."
"Bounce Back Loans have given over a million small businesses a £38 billion boost to survive this pandemic. To give those businesses more time and greater flexibility to repay their loans, we are introducing Pay As You Grow. "
"I am also changing the terms of our other loan schemes. More than 60,000 small and medium sized businesses have now taken out Coronavirus Business Interruption Loans. To help them, I plan to extend the government guarantee on these loans for up to 10 years."
"I'm also extending the deadline of all our loan schemes to the end of this year. And we are starting work on a new, successor loan guarantee programme, set to begin in January."
"Nearly half a million businesses deferred more than £30 billion of VAT this year. On current plans, those payments fall due in March. Instead, I will allow businesses to spread that VAT bill over 11 smaller repayments, with no interest to pay. And any of the millions of self-assessed income taxpayers who need extra help can also now extend their outstanding tax bill over 12 months from next January."
"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 13th. So, to support more than 150,000 businesses and to help protect 2.4 million jobs through the winter. I am announcing today that we are cancelling the planned increase and will keep the lower 5% VAT rate until March 31st next year."
