As win­ter de­scends, will this keep off the chill, and for how long?

Chan­cel­lor’s com­pro­mise is a half­way house be­tween TUC and CBI de­mands

The Daily Telegraph - Business - - Front Page - RUS­SELL LYNCH

HUN­DREDS of thou­sands of work­ers may not find much re­as­sur­ance in Rishi Su­nak’s lat­est pledge to save “vi­able” jobs. A Covid win­ter is de­scend­ing on the labour mar­ket and it is un­clear how much this job sup­port scheme will do to keep off the chill.

Those in sec­tors still ham­strung by so­cial dis­tanc­ing, such as hos­pi­tal­ity or the cre­ative arts, will be ner­vous. The Chan­cel­lor has come up with the ini­tia­tive in re­sponse to ris­ing panic and fresh re­stric­tions as he wres­tles with the pan­demic’s “aw­ful trade-offs” be­tween health and wealth.

The end of fur­lough risked a jobs mas­sacre and Su­nak has the un­en­vi­able task of build­ing a bridge to­wards a vac­cine, while al­low­ing the process of cre­ative de­struc­tion in the econ­omy.

He is surely right that pre­serv­ing dead jobs in as­pic on fur­lough is “fun­da­men­tally wrong”, but how many po­si­tions will this new com­pro­mise ac­tu­ally save? In step­ping in to sup­port the wages of staff able to work the min­i­mum of a third of their ex­ist­ing hours, the Chan­cel­lor has struck a half­way house com­pro­mise be­tween the de­mands of the TUC and the CBI.

But crunch the num­bers and the cal­cu­lus isn’t too ap­peal­ing for a boss faced with the prob­lem of what to do with a worker on the min­i­mum hours de­manded by the scheme.

If an em­ployer keeps on a mem­ber of staff for a third of his or her hours, un­der Su­nak’s plan he is still ac­count­able for a third of the pay of the re­main­ing 66pc. Ef­fec­tively he’s pay­ing 55pc of a worker’s wages for one-third of the hours. How many com­pa­nies are go­ing to do that?

Even com­bined with the £1,000 job re­ten­tion bonus due to be paid at the end of Jan­uary, the em­ployer is still on the hook for some of the wage bill and has some tough de­ci­sions to make. Af­ter Jan­uary, of course, a fresh cull is on the cards.

‘De­mand-led’

The Chan­cel­lor sen­si­bly ze­roed in the scheme at small and medium-sized busi­nesses that ac­count for the bulk of the work­force with 16.6m em­ploy­ees.

But larger firms, which em­ploy about 10.8m peo­ple, will be sub­ject to turnover rules and other re­stric­tions that may make them de­cide to shun the scheme and pull the trig­ger on re­dun­dan­cies in­stead.

There will be re­stric­tions on pay­outs to share­hold­ers while larger com­pa­nies were in the scheme but they will also be barred from mak­ing re­dun­dan­cies, which could also make big­ger cor­po­rates think twice.

The Trea­sury says the scheme will be “de­mand-led”, but es­ti­mates a much less gen­er­ous £300m a month cost of the scheme per 1m work­ers, com­pared to the £5bn to £6bn cost of the fur­lough. The new self-em­ploy­ment grant also be­comes much less gen­er­ous too, with the Trea­sury man­darins keep­ing half an eye on a deficit al­ready set to top £320bn this year. All told JP Mor­gan Chase es­ti­mates to­tal ex­tra spend­ing of £4bn, which is chump change by Covid-19 stan­dards.

Of much more prac­ti­cal use will be the swathe of tax de­fer­rals an­nounced by Su­nak to al­low com­pa­nies to de­lay pay­ments, ex­tend loans and guar­an­tees and even al­low firms to po­ten­tially sus­pend pay­ments al­to­gether for six months if nec­es­sary.

This sup­port should hope­fully al­low firms to ride out what the Bri­tish Cham­bers of Com­merce chief Adam Mar­shall calls the “month 13” prob­lem: the ef­fect on com­pa­nies’ work­ing cap­i­tal when the sup­port schemes an­nounced at the height of the emer­gency in March ex­pire.

That lee­way to deal with debts racked up dur­ing the pan­demic will be gladly seized by many firms keen to get on the front foot and start grow­ing again. In the long term that’s a much bet­ter way to deal with a jobs cri­sis than state sub­si­dies.

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