Furlough set for extension to September
Sunak pledges to use ‘fiscal firepower’ to support British jobs and livelihoods
THE FURLOUGH scheme which has kept millions of people in work during the pandemic will be extended until the end of September, with employers asked to contribute to workers’ salaries from July, the Chancellor will announce today.
Rishi Sunak has promised to use the full “fiscal firepower” of the Government to support jobs and livelihoods but says he will be “honest” in his Budget about the measures necessary to repair the country’s shattered public finances.
He is expected to say that the Coronavirus Job Retention Scheme, which has protected more than 11 million jobs since its inception and was due to end next month, will remain in place until the end of September.
But the Government’s contribution will be tapered from July – with employers asked to pay in alongside the taxpayer for the cost of furloughed employees.
From July, employers will be expected to contribute 10 per cent, increasing to 20 per cent in August and September, as the economy reopens. Employees will continue to receive 80 per cent of their salary for hours not worked until the scheme ends.
The Chancellor will also announce further support for selfemployed workers, with more than 600,000 people – many of whom become self-employed in 2019/20 – now eligible for cash grants.
A fourth grant from the SelfEmployment Income Support Scheme (SEISS) will be available to claim from April, worth 80 per cent of three months’ average trading profits up to £7,500.
The Budget speech will be closely scrutinised for evidence of policies that will aid the Government’s ‘levelling up’ agenda to
boost the northern economy. Mr Sunak is expected to announce more details of his plans to set up a new Treasury campus in northern England, locations of low-tax freeports and specifics about the £4.8bn Levelling Up Fund.
With Mr Sunak’s predecessor as Richmond MP, William Hague, warning that taxes would have to go up to pay for the cost of coronavirus, he is set to reveal how he will tackle the black hole in the nation’s finances.
Setting out his economic plan in his second Budget speech, the Chancellor is expected to say:
“We’re using the full measure of our fiscal firepower to protect the jobs and livelihoods of the British people.
“First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis.
“Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that.
“And, third, in today’s Budget we begin the work of building our future economy.”
Bridget Phillipson, Labour’s Shadow Chief Secretary to the Treasury, said: “These changes to support schemes could have been made months ago. Businesses and workers have been pleading with the Chancellor to give them certainty – but they have had to wait because he said it wouldn’t be appropriate until the Budget.
“Announcing it the night before shows the focus is on Rishi Sunak getting his moment in the sun rather than protecting jobs and livelihoods.”
The Treasury said that hundreds of thousands more people will be eligible for the grants this time, as tax return data for 2019/20 is now available.
Business Secretary Kwasi Kwarteng yesterday played down the prospect of immediate large tax increases but said Mr Sunak had acknowledged the country could not “go on spending money forever”.
“For now, what we have to do is support businesses, individuals, families, through what has been an extremely difficult time,” he told BBC Breakfast.
“We have got another three years to run in the parliament and the Chancellor will be looking to reduce the deficit.
“For now, I think the real emphasis is on trying to provide critical support.”
We will need to begin fixing the public finances – and I want to be honest Chancellor of the Exchequer Rishi Sunak
THE LOW-TAX freeports which Rishi Sunak says will “turbocharge” the country’s economy will at best relocate, rather than create, economic activity and jobs, according to an academic think-tank.
A new report by UK in a Changing Europe says the key component of post-Brexit economic strategy is not a “magic bullet” and are unlikely to lead to the sort of transformation the Government hopes for.
It says that evidence that freeports create additional jobs is unclear, and at best mixed, while there is a public cost of maintaining freeports which is exacerbated by the necessity of providing financial incentives for businesses to relocate to them.
They could be used to solve specific problems, the report says, such as attracting jobs to a lagging region, focusing them on a specific sector which is particularly struggling due to tariffs, or opening up new financing models for local authorities.
Mr Sunak has put them at the heart of the levelling up agenda and his plans for post-Brexit Britain. They are similar to ‘enterprise zones’, specifically targeted at those businesses who import, process and re-export goods. Customs duty becomes payable only when the goods, possibly after processing, enter the domestic market. Other incentives on tax, planning and reduced red tape may also be available. South Yorkshire, the Humber and Tees Valley are bidding to host a freeport.
Professor Catherine Barnard, deputy director of the thinktank, said: “If the Government thinks freeports are a magic bullet that will create hundreds of thousands of new jobs, bring billions of additional pounds to the Exchequer and radically transform an area it is mistaken.”
If Government thinks freeports are a magic bullet... it is mistaken. Professor Catherine Barnard, deputy director of UK in a Changing Europe.