Coronavirus: Rishi Sunak vows fresh help for self-employed as firms take on more furlough costs
Chancellor Rishi Sunak detailed the latest changes in the Government’s bid to curb the economic impact of Covid-19.
5 min read
Rishi Sunak has confirmed the self-employed will get a fresh round of state support to help them weather the coronavirus crisis, while firms with staff on furlough will be asked to start footing more of the bill.
In a fresh clutch of announcements from the Treasury, the Chancellor revealed the Self-Employment Income Support Scheme would be extended with a second and final grant paid out in August.
Meanwhile, the Coronavirus Job Retention Scheme - which currently sees the state pay 80% of wage costs for more than 8 million employees across the UK - will be tweaked to allow part-time hours from July.
And employers will be asked to progressively step up their contributions from August until the scheme closes at the end of Ocobter.
Announcing the changes, Mr Sunak said: “Our top priority has always been to support people, protect jobs and businesses through this crisis.
"The furlough and self-employment schemes have been a lifeline for millions of people and businesses.
“We stood behind Britain’s businesses and workers as we came into this crisis and we stand behind them as we come through the other side.
“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.”
SELF-EMPLOYMENT CHANGES
The Government has already extended the furloughing scheme for employees to the end of October from its original cut-off date of June.
But ministers have faced growing calls to offer similar guarantees to the self-employed, with more than 100 MPs writing to Mr Sunak on Friday calling on him to extend the “lifeline” help.
Under the extension announced by the Chancellor, those eligible for the Self-Employment Income Support Scheme will be able to claim a “second and final” grant capped at £6,570.
The grant will be worth 70% of their average monthly trading profits, with payment made in a single instalment designed to cover three months’ worth of profits.
FURLOUGH TAPER
The Coronavirus Job Retention Scheme will meanwhile be tweaked from 1 July, one month earlier than previously expected, to allow firms to bring back employees part time.
They will able to decide the hours and shift patterns for their staff, but will have to pay the wages of their employees while they are actually in work, with the Government covering days in which they are asked to down tools.
From August, the Government will begin asking employers to pay their employee’s national insurance and pension costs again - an amount the Treasury estimates will leave 40% of employers unaffected.
Then in September, the Government’s support level will drop to 70% of wages, with employees making up national insurance and pension costs plus the remaining 10% of wages to make up the 80% total covered under the scheme.
In what officials are adamant will be the final phase of the Job Retention Scheme, the Government subsidy will drop to 60% of wages in October, with the monthly salary cap dropping to £1,875.
This means employers will pay national insurance contributions and pension contributions as well as up to 20% of wages from October.
The furloughing scheme will also close to new entrants on June 30, the Treasury confirmed.
"I believe it is right in the final phase of this eight-month scheme to ask employers to contribute alongside the taxpayer towards the wages of their staff," Mr Sunak told the daily Number 10 press conference.
"But I understand too that businesses and employers have been through an incredibly difficult time. So I have decided to ask employers to pay only a modest contribution, introduced slowly over the coming months."
‘NEW NORMAL’
The changes to both schemes have been given a cautious welcome by business groups and trade unions.
Mike Cherry of the Federation of Small Businesses (FSB) said: “By providing employers with the adaptability they’ll require as businesses adjust to a new normal, and bringing forward the flexible furlough launch date, the Government is giving hope to small firms right across the UK.
“Delivery is now key, and new operational systems should be as streamlined as possible.”
He added: “Our five million-strong self-employed community will be greatly relieved to know that the income cliff-edge they were facing in two days’ time has now been removed.
“The hope is that more and more sole traders will be able to return to work safely as restrictions are eased.
"Policymakers have rightly recognised that self-employed business owners working in a lot of sectors – not least hair & beauty, events and travel – will be massively impacted by the current downturn for many weeks to come.”
“The UK cannot afford the misery of mass unemployment" - Frances O'Grady, the TUC
The TUC, the umbrella group for Britain’s unions, meanwhile said the Chancellor had “listened to unions and allowed employers to start using short-time furlough from July”.
The organisation’s general secretary Frances O’Grady added: “As employers begin to contribute to the costs of furlough, we remain pleased that all workers will continue to receive at least 80% of their wages for every hour worked until the scheme closes in October.
“However, the Government needs to act urgently to make sure workers with health conditions or childcare responsibilities aren't first in line when it comes to redundancies.”
And Labour’s Shadow Chancellor Anneliese Dodds said: “It is welcome that the Government has heeded Labour’s calls for a more gradual introduction of the employer contribution to furlough, the introduction of flexibility within furlough to allow part time working, and the extension of the self-employed scheme.
“However, it is concerning that there is no commitment within these plans for support to only be scaled back in step with the removal of lockdown.
"Nor is there any analysis of the impact on unemployment of a ‘one size fits all’ approach being adopted across all sectors."
The oppositon frontbencher added: “The Chancellor must publish the evidence behind these decisions to provide reassurance that his proposals won’t cause an additional spike in unemployment, and an even more difficult economic recovery from this crisis.”
Although the Treasury has said it will not extend either scheme beyond the ends dates now outlined, the Government has not ruled out further targeted support as the UK heads for what is expected to be a sharp economic downturn.
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