Chancellor of the Exchequer Rishi Sunak’s new job incentive scheme ran into criticism today as not being enough and a way for the government to lower spending.
Even the chancellor himself admitted the three-pronged Winter Economy Plan announced yesterday won’t be enough to save the whole economy.
“I cannot save every business. I cannot save every job, “said the chancellor, adding it was impossible to know how many jobs it would save.
Key to the new measures was the replacement of the furlough scheme.
More than one in ten UK workers currently are being supported by furloughing, a programme that is due to come to an end on October 31.
The new scheme will start on November 1 and last until the end of April with eligible employees receiving at least 77% of their normal pay split between the employer and government.
This is less the furlough scheme, however, where the government was paying 60% of salaries and the company was paying 20%.
Sunak said it is designed to help businesses keep employees in a job on shorter hours rather than making them redundant.
All small and medium-sized businesses are eligible to apply, plus larger businesses where their turnover has fallen, but it will only apply to ‘viable jobs’, which seeming rules out businesses currently shut because of coronavirus restrictions.
The self-employed get a subsidy scheme, while emergency COVID-19 schemes were extended until the end of the 2020 and the 5% rate of VAT for the hospitality sector extended until March next year.
The total cost was estimated at £5bn, compared to more than £200bn spent already on COVID-19 bail-outs.
Torsten Bell, chief executive of think-tank Resolution Foundation, said the higher contribution required from firms would not encourage staff to be kept on.
In a report analysing the new measures, it said it cost a firm £1,500 to employ one full-time worker on £17,000, but more than £2,000 a month to employ two half-time workers on the same full-time equivalent salary.
Labour echoed the comments with shadow business minister Lucy Powell saying: "The cost to employers and the incentive to employers are not good enough"
"It will be cheaper for an employer to keep somebody on full-time than it would be to keep two people working part-time.”
Higher unemployment claims would also offset the lower costs of the scheme, defeating the object, said economists.
Latest UK borrowing figures highlight the financial pressure the chancellor is under with a further £35.9bn in debt taken on by the government in August, largely to pay for coronavirus support schemes.
The UK’s total national debt is now more than £2trn or the equivalent of £30,000 per person.
Since April. when coronavirus measures were introduced, the government has borrowed nearly £174bn or the largest amount since records started in 1993.