'Always running to keep up'
Chancellor criticised for failing to act sooner after latest economic update
Chancellor Rishi Sunak was accused of ‘yet another last-minute move’ after he announced a new package of financial support in his latest economic statement today (October 22), just over one week before the furlough scheme is slated to end.
As part of the new package of support, additional grants will be made available to communities under tier-2 restrictions, and the government’s short-time working scheme will be made more generous.
The chancellor has approved new funding so that businesses – mostly in the hospitality sector — that are still allowed to operate under tier-2 lockdowns but whose trade has been severely hit because of restrictions on socialising will have access to cash grants up to £2100 every month.
These grants will be made available retrospectively so that communities which have been under Tier-2 restrictions for weeks or months will still benefit for the time they were previously under lockdown.
Jobs Support Scheme changes
The Jobs Support Scheme – the government’s short-time working scheme first announced in September and due to go into effect from November 1 – will be amended so that employers will have to contribute less to employees’ wages.
Originally, the scheme required staff to be working at least 30 per cent of their normal hours to qualify. The government would pay a third of workers’ wages when they were not in work, while employers would likewise contribute a third to unworked hours, and workers would in turn forgo a third. Employers would be expected to pay 100 per cent of wages for any hours worked as normal.
The scheme was widely criticised when it was first announced because the steep employer contributions meant that it was far more expensive for businesses to, for example, employ two workers part-time than it was to employ one worker full-time and sack the second worker.
Now, employers’ contributions in this scheme will be reduced to just 5 per cent for hours not in work, and the government will cover 62 per cent of wages for unworked hours. Under the new scheme, workers will purportedly take home 73 per cent of their wages. To qualify for the scheme, workers need now only work 20 per cent of their normal hours, instead of 30 per cent, meaning a worker who normally works a full week could work just one day a week and still qualify.
Sunak also announced greater support for self-employed workers, with the self-employment grant scheme now covering up to 40 per cent of profits instead of 20 per cent. This takes the maximum self-employment grant up to a total of £3750 instead of £1875.
‘Like a long-running TV show’
While the short-time working scheme has been made more generous, nothing has changed for workers who are under tier-3 restrictions who cannot work because their business is closed. They will still only receive two-thirds of their wages paid for by the state, instead of the 80 per cent paid under the initial furlough scheme.
“I’ve always said that we must be ready to adapt our financial support as the situation evolves, and that is what we are doing today,” Sunak said in the Commons. “These changes mean that our support will reach many more people and protect many more jobs.
“I know that the introduction of further restrictions has left many people worried for themselves, their families and communities. I hope the government’s stepped-up support can be part of the country pulling together in the coming months.”
While many welcomed the more generous levels of support, the government was widely criticised for constantly running to play catch-up, and not offering support when it was needed weeks and months ago, after which thousands of jobs have been lost.
Responding to Sunak, shadow chancellor Anneliese Dodds told MPs in the Commons, “How many jobs have been lost, Mr Speaker, because of that inaction? Over a million have already gone. Last quarter we saw a record rise in redundancies. The chancellor could have done much more if he had acted sooner.”
“And now we see yet another last-minute move. Let me ask the chancellor, what’s changed? What’s changed that means this is the right thing to do now but it wasn’t when parts of the north and Midlands entered tier 2 many weeks ago?”
“This is becoming like a long-running television show,” she added. “The winter economy plan, series three. But, you know, the twist is, it didn’t last the winter, it didn’t do enough to help the economy and it wasn’t a plan. We’ve got to get ahead of this crisis, instead of always running to keep up.”
The government was also criticised for not revealing until now that northern communities which have effectively been under tier-2 restrictions for weeks — and in some cases even months — will receive additional financial support that is backdated to when restrictions first began.
Greater Manchester mayor Andy Burnham was especially vocal – noting that he would have come to an agreement with the government on Tuesday (October 20) had he known that support such as business grants were to be applied retrospectively.
Instead, talks broke down between Burnham and the government after the government refused to meet Burnham and other Manchester leaders’ final offer of a £65m support package for Greater Manchester.
Commenting after Sunak’s economic update, Burnham tweeted, “Honestly, can barely believe what I’m reading here. Why on earth was this not put on the table on Tuesday to reach an agreement with us?
“I said directly to the PM that a deal was there to be done if it took into account the effects on [Greater Manchester] businesses of three months in Tier 2.”
Honestly, can barely believe what I’m reading here. 👇
Why on earth was this not put on the table on Tuesday to reach an agreement with us?
I said directly to the PM that a deal was there to be done if it took into account the effects on GM businesses of three months in Tier 2. https://t.co/w2AeeLitGP
— Andy Burnham (@AndyBurnhamGM) October 22, 2020
Latest support ‘falls short’ for hospitality
Sunak was also criticised for failing to increase wage subsidy support for workers who cannot work at all under tier-3 restrictions – they will still be expected to make due with only two-thirds of their wages.
He was moreover widely slated for failing to understand the deep crisis the hospitality sector faces, which urgently needs more support if it is to have any sort of viable future.
Unite assistant general secretary Howard Beckett, who leads on for the union on hospitality, said, “While today’s Tier 2 measures are a step in the right direction for hospitality and tourism, they still fall well short of what is needed to stop the devastation sweeping through this sector.
“We have set out what the chancellor needs to do to help the industry get back on its feet, including extending the JRS at 80 per cent of wages, providing they don’t fall below the minimum wage, and the establishment of a Hospitality Commission to retrain workers who lose their jobs, in order to provide hope of future employment.”
‘Certain hardship for a great many people’
Unite general secretary Len McCluskey also criticised the chancellor for failing to providing adequate levels of support needed to protect people’s incomes. While he welcomed some of the measures announced today, he said more most be done urgently.
“The government has at last done more to support working people,” he said. “The adjustment to the Job Support Scheme was urgently needed and ought to make it easier for struggling employers to hold onto staff.
“However, it does nothing to help those sectors hardest hit and which are not in Tier 2 – aviation, aerospace and hospitality. These sectors are struggling and desperately need help that reflects the true picture nationally.
“It also remains the case that this government is still asking people to make ends meet with huge losses of income.
“This Job Support Scheme is still asking people to survive on 60 per cent of their wages and for many this is simply not possible,” he added. “Banks and landlords will expect full payment and the cost of feeding a family has not been reduced. Unite remains committed to campaigning for an extension of the Job Retention Scheme, specific to sectors in need with a minimum commitment of 80 per cent wage support.
“Without this, there will be certain hardship for a great many people so we would urge the chancellor to again review the levels of support this government will offer. Borrowing costs are at historically low levels so it makes total sense for the chancellor to invest against poverty and despair and in the brighter future the people and the economy of this country deserve.
“The support announced today ought to have come weeks ago,” McCluskey continued. “The chancellor has at last moved but who knows how many workers were sent to the dole along the road to get here.
“It is vital now that the government learns from our competitor countries in providing the long-term assistance needed to support people and the economy to come out the other side of this dreadful disease in as fit a shape as possible. Bespoke packages are still needed for those sectors that can propel our economy out of this hole and into recovery.
“It remains concerning that our government refuses to match the support provided to by the French and German to their citizens. The workers in those countries rest easier in their beds at night; UK workers deserve the same.”
By Hajera Blagg