Chancellor announces grants to cover 80% of wages

Rishi Sunak announcing the government's latest package of coronavirus measures
MATT DUNHAM/POOL/EPA-EFE/Shutterstock

Chancellor Rishi Sunak has set out an unprecedented scheme of job support for the British state, and claimed his economic plan in response to the coronavirus outbreak was one of the most comprehensive in the world. 

He said: “Our plan will protect people’s jobs and strengthen the safety net for people who work for themselves.”

Launching a “coronavirus job retention scheme”, Sunak said grants from HM Revenue and Customs would cover 80% of salaries up to £2,500 a month. The scheme would be backdated to 1 March and all organisations including charities and non-profits would qualify for funds.

He said: “We will pay grants to support jobs for as long as necessary. There will be no limit on what the budget will be. The first grants will be paid before 1 April”. He added that HMRC was working night and day to implement the programme.

There would be further cashflow support for businesses through the tax system, with VAT payments deferred until the end of June. The aim of the scheme was to ensure that employees could be furloughed rather than laid off.

“We’re launching a major campaign to advertise the support for business and people. Please look at that support before any decision to lay people off‚” he said, adding “I cannot promise that no one will face hardship in the weeks ahead”.

Measures also included self-employed people being able to access universal credit up to the value of statutory sick pay. Tax self assessments would be deferred from July 2020 until January 2021 and there would be £1bn support for renters, Sunak said.

He said he hoped that small businesses would do everything they could to avoid laying off staff.

Prime minister Boris Johnson earlier promised to “stand by you in a way the government has never done before”. He emphasised that the measures would be temporary.

Speaking before the announcement, Paul Nowak, TUC deputy general secretary told BBC News: “We can’t allow thousands of people to be put out of work because we decided we can’t afford to support them.”

The measures appear to meet the demands of many employment experts including Peter Cheese, CIPD chief executive, who earlier stated: “Wage subsidies have been effectively introduced in other developed economies and we think this is something the government should now seriously consider for the UK. We look forward to working with the government to do whatever it takes to help protect working people, increase workplace resilience, and make a rapid recovery more likely.”

The CIPD also urged employers to be as flexible and understanding as possible when it came to the impact of school closures on working parents. Cheese said: “Employers must accept that there will be disruption and that working parents will struggle to be as productive as normal. Employees should speak to their line managers and HR teams to understand how they can best balance family and work commitments.”

Labour leader Jeremy Corbyn, asked what he hoped for from the chancellor’s announcement, said: “It’s up to the government now to guarantee the economic security of the entire population.”

Industry response

Jonathan Geldart, director general of the Institute of Directors, said of Sunak’s statement: “This was a hugely significant step forward for employers. Relying mainly on loans wasn’t going to be enough, as many business leaders balked at the prospect of taking on more risk. Grants to support employment will be a much more welcome approach for firms stuck between cutting costs and retaining staff, but the acid test of these policies is how fast they reach businesses.”

He added that the deferral of VAT was another substantial shift. He added: “We’ll be getting the message out to directors about the new support, but we’ll also be listening to their response. We know there are still many other areas of concern, including commercial mortgages, rent, late payments and many more. The government has closed more businesses tonight, but we know this may not be the end of public health response, so ministers must be ready to act as necessary.”

Chief executive of the Recruitment & Employment Confederation, Neil Carberry, gave Sunak’s statement a warm welcome, describing it as “the big action the REC and many other business organisations has been working hard to achieve all week.

“Cash flow support, VAT deferment and wage payments are the exact radical measures that will help. The most important thing now is to implement these changes with great speed. Looking ahead, recruitment professionals have a pivotal role to play in helping people get jobs in sectors where they are most needed at this time such as healthcare, logistics and the food sector.”

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2 Responses to Chancellor announces grants to cover 80% of wages

  1. Avatar
    Terence Williams 20 Mar 2020 at 6:01 pm #

    Is the £2500 promised free of tax?

    • Avatar
      David white 31 Mar 2020 at 10:30 am #

      No

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