Chancellor Rishi Sunak has unveiled a new Jobs Support Scheme which will see the government and firms top-up wages covering up to two-thirds of employees’ hours, which will start in November after the furlough scheme ends and will last for six months.
Speaking in the Commons, Sunak set out his “winter economy plan” after the government announced new restrictions to curb rising Covid-19 cases earlier this week.
Employees will be required to work for at least a third of their normal hours to qualify for the new scheme.
According to the Office for National Statistics, almost three million workers, equivalent to around 12 per cent of the UK workforce, are on furlough leave either fully or partially, and their jobs could be at risk when the scheme winds down.
Sunak has also announced an extension to the repayment window for businesses who have borrowed money through the government’s bounce-back loan initiative, and the VAT cut for hospitality and tourism businesses will be extended to the end of March.
This means that five per cent VAT will apply to hospitality and tourism businesses for a further two-and-a-half months, having initially been due to run out on January 12, 2021.
Businesses who deferred their VAT will no longer have to pay a lump sum at the end of March either, and have been given the option of splitting repayments into smaller, interest free repayments over the course of 11 months.
In the run-up to Sunak’s announcement, Scottish first minister Nicola Sturgeon had written to the prime minister to stress that additional financial support was required to ease the strain of Covid-19 on businesses. She also called on Boris Johnson to hold talks between the four leaders of the UK nations to tighten UK-wide restrictions further to curb the virus’ spread.
She said: "In other words, if we believe further action will be required there is nothing to be gained - and potentially much to be lost, including lives - from delay."
The Scottish government has been vocal in calls to have its borrowing powers extended to help cushion the impact of the crisis, particularly on the hospitality industry.
In response to Sturgeon’s letter, a UK government spokesperson said: "The prime minister held a Cobra meeting on Tuesday which was attended by the leaders of the devolved administrations.
"This crisis has shown clearly the value of Scotland being part of a strong United Kingdom, with the UK government providing the bulk of Covid testing in Scotland, the UK's armed forces playing a key role in providing support for Scottish communities, and the UK Treasury playing an absolutely critical role in supporting jobs and business across Scotland.
"We will continue to tackle this pandemic as one United Kingdom."
The Treasury has also abandoned plans to hold an Autumn Budget, instead preferring to focus on the here and now of handling the financial impact of the pandemic. A spending review will be carried out in its place.
The BBC reports that one of its sources from within the Treasury said: "No-one wanted to be in this situation, but we need to respond to it.
"The chancellor has shown he has been creative in the past and we hope that people will trust us to continue in that vein."
The sourced added that “giving people reassurance and businesses the help they need” as well as generating jobs were among the chancellor’s priorities.
Senior MPs were supportive of the move, with the Education Committee’s Conservative chair Rob Halfon telling The Telegraph: "I think it is better to do [a Budget] after we near the end of the pandemic, as it is impossible to know what is going to happen. I would rather have measures planned for individual help for business.
"Rishi is doing the right thing by setting out measures to help, which is much more valuable to businesses than an overall early Budget."
Meanwhile, Labour MP Nadia Whittome has been sacked from her role as the shadow health secretary’s parliamentary private secretary after voting against the Overseas Operations [Service Personnel and Veterans] Bill.
Two more Labour MPs, Beth Winter and Olivia Blake, are also thought to have left their roles after disobeying the Labour whip who ordered them to abstain.
The government has claimed that the bill is necessary to protect armed forces personnel from “vexatious prosecutions” but Whittome argued that it was both “anti-veteran and anti-human rights” and could decriminalise acts of torture.
A total of 18 Labour MPs voted against the legislation, including former party leader Jeremy Corbyn.
A Labour source had told the PA news agency: “Anyone who wanted to vote against the whip was told they would have to resign.”