London — Britain’s government launched scaled-back job support on Thursday for workers hit by the resurgent Covid-19 pandemic, but warned not everyone could be helped during an economic meltdown that is threatening millions of jobs.
Chancellor of the Exchequer Rishi Sunak also unveiled plans to extend loan repayments for businesses and delay ending a tax cut for the hospitality sector which has been drastically hit by coronavirus restrictions.
Despite the state support, unemployment looks set to surge by the end of 2020, with major employers from British Airways to Rolls-Royce and Marks & Spencer shedding jobs rapidly.
“I cannot save every business, I cannot save every job,” Sunak told parliament as he announced his Winter Economy Plan, which replaced a planned budget statement and set out a six-month replacement for the jobs furlough scheme.
“As the economy reopens it is fundamentally wrong to hold people in jobs that only exist inside the furlough.”
At the heart of the new measures is a replacement for the Coronavirus Job Retention Scheme, which supported 8.9-million private sector jobs at its peak in May and ends in October — sooner than its equivalents in other countries.
Under the new programme, government support will only be available to workers whose employers keep them on at least a third of their normal hours.
If employers agree to pay staff a third of their salary for unworked hours, the government will contribute another third, up to £698 (about R15,000) a month.
The Confederation of British Industry, which had urged the government to adopt such a scheme, said it would help save hundreds of thousands of jobs.
But millions of people have benefited from furlough support, and Paul Johnson, director of the Institute for Fiscal Studies, said the new programme was significantly less generous.
“It is clear that many jobs will be lost over the coming months,” he said.
Budget forecasters estimate the furlough scheme will have cost around £50bn by the time it ends in October.
The pandemic has killed nearly 42,000 people in Britain, the highest death toll in Europe, and the government is borrowing record amounts to help an economy on track for its biggest annual contraction in about 100 years.
Covid-19 cases this week showed their biggest daily increase since May, prompting the government to order bars to close early and people to work from home again, moves that will put further strain on the economy.
“I know people are anxious, and afraid, and exhausted ... but there are reasons to be cautiously optimistic,” Sunak said.
The opposition Labour Party criticised the delay in introducing the job measure, which it said had hurt business confidence, while the general secretary of the Public and Commercial Services trade union, Mark Serwotka, called it “a plaster to cover a gaping wound”.
The Resolution Foundation think tank said many businesses had little incentive to use the scheme, compared with cutting staff hours without using the plan, as they would have to match the government wage top-up.
Sunak’s measures offered the self-employed similar support.
He also plans to extend a cut to value-added tax for hotels, cafes and restaurants until March 31. And businesses will be given 10 years to repay government-backed loans rather than six.
Under the government’s Bounce Back Loan Scheme, 1.3-million small businesses have taken out a total of £38bn ($48.4bn) in loans worth up to £50,000 each.
The Bank of England forecast last month that unemployment would jump to 7.5% by the end of 2020 if there were no replacement for the existing furlough scheme ending at the end of October, up from 4.1% in the three months to July.