Business lifeline is extended but

An extension to the government’s flagship coronavirus economic support scheme may only delay mass redundancies, the Chancellor was warned after he said companies will begin having to contribute towards the cost of furloughed workers’ national insurance, pension contributions and salary from August

Rishi Sunak said support for employees’ wages would remain in place until October, with the government’s wage guarantee scheme for furloughed workers tapering off before closing.

Independent forecasters said the total cost of the unprecedented bailout for businesses could reach £100 billion over eight months – as much as the running costs of the entire NHS.

But critics said removing financial support even in a gradual way from businesses still crippled by social distancing could see job losses skyrocket. Announcing the changes, Mr Sunak revealed employers will be able to begin bringing back staff on a part-time basis from July, a month earlier than previously announced, as the lockdown is eased across the UK.

And self-employed workers whose incomes have been hit by the coronavirus lockdown will be able to claim up to £6,570 extra support, the Chancellor said.

“Now, as we begin to re-open our country and kickstart our economy, these schemes will adjust to ensure those who are able to work can do so, while remaining amongst the most generous in the world,” Mr Sunak said.

But he added that “there will be hardship ahead for many and that rests heavily on my shoulders”.

Mr Sunak said: “I will work very hard to make sure that all of those who do lose those jobs as a result of what’s happening – I’m working as hard as I can to get them back into work, and good work, as quickly as possible.”

The Coronavirus Jobs Retention Scheme has seen the government cover 80 per cent of the wages for 8.4 million staff put on furlough.

Industries that are set to be worst hit by the crisis and are likely to be asked to wait the longest to reopen, such as the hospitality and tourism sector, had asked for a further, flexible extension.

From August, businesses will need to cover employer national insurance and pension contributions on behalf of furloughed staff.

In September, they will also be asked to pay 10 per cent of the salary guarantee, which is capped at 80 per cent of earnings up to a maximum of £2,500 per month.

And from October, the employer’s share of salary costs for furloughed staff will rise to 20 per cent.

Employers seeking to bring furloughed staff back parttime will need to demonstrate howmanyhourstheiremployee will have normally worked to make a claim for part of their wages.

Part-time furloughed staff who believe they are not receiving the full 80 per cent of average wages they are due will be able to report their employers to an HMRC fraud line.

For the self-employed, workers whose 2018-19 tax return showed they earned at least 50 per cent of their income from self-employment have been eligible to apply for a taxable grant of up to 80 per cent of their average monthly profits over three months, up to £7,500. The scheme has just opened and applications can be made up to 13 July.

A second grant scheme will open in August on the same basis and cover 70 per cent of average profits, up to £6,570.

The Scottish Government welcomed news that the furlough scheme was being extended, but warned that plans to ask businesses to contribute “cannot be a blanket approach across all employers and sectors”.

“There remain some sectors that will likely still face restrictions in August and I do not think it is realistic to expect employers who continue to face these challenges to have to contribute to the scheme,” economy secretary Fiona Hyslop said.

“This is a particular concern for some sectors, such as the hospitality sector, where a very large proportion of employees are currently furloughed.

“If there is not some allowance for this then this may just delay, rather than avoid, mass redundancies and business closures in those sectors.”

Shadow chancellor Anneliese Dodds also welcomed the extension, but said it was “concerning that there is no commitment for support to only be scaled back in step with the removal of lockdown”.

The independent Institute for Fiscal Studies think tank said that the total cost of support for employees and selfemployed workers “could easily breach £100bn” – around 11 per cent of total government spending in a normal year.

IFS director Paul Johnson said: “Preserving jobs comes with a hefty price tag and in some cases will simply delay the movement of employees into unemployment.”

And while business leaders also welcomed the news across the board, Dame Carolyn Fairbairn, the directorgeneral of the Confederation of British Industry said: “Previously viable firms not able to open until later may need further assistance in the coming months.”

paris.gourtsoyannis@scotsman.com