Rishi Sunak wants firms to pay more, but also survive

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Chancellor Rishi Sunak will start to remove the government furlough scheme

The Chancellor is attempting a delicate balancing act.

Slowly withdrawing very expensive government support programmes without crashing the economy.

The government is currently paying 80% of the wages of nearly 8.5 million employees and 80% of 2.3 million self employed worker’s take home pay till the end of July at cost in the many tens of billions of pounds.

As the economy emerges from lockdown that will change.

From 1 July, employers will be able to bring in workers part-time and pay them for the time worked. That is a month early, has been widely called for and will be welcomed.

Then the hard part starts. From August, employers will have to pay National Insurance and pension costs for furloughed workers. From September, those contributions plus 10% of their wages and from 1 October, employers must pay 20% until the scheme ends at the end of the month.

Crucially, If employers don’t contribute – neither will the government.

Cash-strapped employers must decide if they can take on an increasing burden to keep workers for whom there may be little or no work.

The chancellor said the government couldn’t go on meeting the full cost of the scheme.

The hospitality industry has been particularly hard hit by the lockdown, and it will face further difficulties because of the need to maintain social distancing and potential future customer reticence to return when pubs and restaurants reopen.

No special treatment

The chancellor resisted calls for special treatment of this or other hard-hit sectors. David Moore is a restaurateur who owns the Michelin-starred Pied a Terre, in London. He’s worried the additional costs announced by the chancellor could mean jobs would be lost.

“It would be a real shame if the retention scheme turned out to be a very, very glorified waiting room for the unemployed. And I feel that if we come back with any level of uncertainty – a lot of businesses will cut harder and further than maybe they thought of doing first”

There was also an important announcement for self employed – who got a cash grant for March – June capped at £7,500. They will now get a maximum and final payment of £6,570 in August.

The withdrawal is more gradual than many had feared and the government hopes that the support withdrawal will be mirrored by business demand recovering.

But we may be about to find out how many real jobs are left in the post-coronavirus economy.

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