Rishi Sunak has announced a replacement for the furlough scheme - the new six-month Job Support Scheme is intended to protect jobs in businesses affected by coronavirus over the winter.
The package of measures - the Winter Economy Plan - applies to all regions and nations of the UK; as well as the job scheme, there will be an extension of the Self Employment Income Support Scheme (SEISS) and further deferrals of self-assessment tax payments.
Job Support Scheme
The new job scheme replaces the furlough scheme; it will run for six months from 1 November 2020. Under the scheme, the government will contribute towards the wages of employees who are working fewer than normal hours. Employers will continue to pay the wages of staff for the hours they work - but for the hours not worked, the government and the employer will each pay one third of their equivalent salary.
The BBC has calculated that for someone who works a third of their standard hours, the government's contribution to their pay would be about 22%. It would leave employees with nearly 78% of their salary.
The level of grant will be calculated based on the employee's usual salary, capped at £697.92 per month; employees must be working at least 33% of their usual hours.
The Job Support Scheme will be open to businesses across the UK even if they have not previously used the furlough scheme.
It sits alongside the Jobs Retention Bonus of £1,000 per furloughed employee that is kept on until the start of February 2021 after the furlough scheme ends at the end of October.
Support for the self-employed
In addition, the government is extending the Self Employment Income Support Scheme Grant. An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus. The initial lump sum will cover three months' worth of profits for the period from November to the end of January next year. This is worth 20% of average monthly profits, up to a total of £1,875.
An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April.
VAT and income tax
The government will extend the temporary 15% VAT cut for the tourism and hospitality sectors to the end of March 2021. In addition, up to half a million business who deferred their VAT bills will be given more breathing space through the New Payment Scheme, which gives them the option to pay back in smaller instalments. Rather than paying a lump sum in full at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.
On top of this, around 11 million self-assessment taxpayers will benefit from a 12-month extension from HMRC on the Time to Pay self-service facility, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.
More than a million businesses that took out a Bounce Back Loan will benefit from a new Pay as You Grow flexible repayment system. This flexibility includes extending the length of the loan from six years to ten, which will cut monthly repayments by nearly half. Interest-only periods of up to six months and payment holidays will also be available.
The government also plans to give Coronavirus Business Interruption Loan Scheme lenders the ability to extend the length of loans from a maximum of six years to ten years if it will help businesses to repay the loan.
Business groups have welcomed the announcement. Mike Cherry, national chair of the Federation of Small Businesses (FSB), described the package of measures as "a swift and significant intervention" and Adam Marshall, director general of the British Chambers of Commerce (BCC), said they would "give business and the economy an important shot in the arm".
Carolyn Fairbairn, CBI director-general, said: "These bold steps from the Treasury will save hundreds of thousands of viable jobs this winter … The chancellor has listened to evidence from business and acted decisively. It is this spirit of agility and collaboration that will help make 2021 a year of growth and renewal."
Written by Rachel Miller.