Business

Fears new wage support scheme will fall short for hardest hit sectors

Rishi Sunak holds his Winter Economy Plan. Photo: Dominic Lipinski-PA Wire
Ryan McAleer

THE UK Government will continue to top up the wages of some workers over the winter, but there are fears it will fall short for thousands of workers in the sectors hardest hit by Covid-19.

Chancellor Rishi Sunak, right, said the Job Support Scheme (JSS) would replace the furlough scheme for “viable” jobs for six months from November 1 – with employees required to work at least one-third of their normal hours.

Unlike the furlough scheme, employers will cover most of the wages, with the UK Government covering one-third of pay for hours not worked.

The Treasury’s contribution will be capped at £698 a month, less than one-third of the maximum £2,500 allowed under the furlough scheme.

Based on an employee working one-third of their typical hours, they will receive 77 per cent of their normal pay, with their employer covering 55 per cent and the Government chipping in 22 per cent.

But with 78,100 employees in Northern Ireland still fully furloughed at the end of July, business groups including Belfast Chamber and the Northern Ireland Tourism Alliance have questioned whether businesses badly bit by Covid-19 will be able to afford to pay staff for hours they aren’t working.

READ MORE: Measured welcome from NI business groups for Chancellor's new Covid-19 support measures

Economist Richard Ramsey said the scheme is unlikely to prevent significant redundancies in the worst hit sectors where a third of normal working hours is still not possible including the hospitality, arts and entertainment sectors.

But he said it could help flatten the spike in unemployment that had been predicted at the end of the furlough scheme.

The Chancellor told MPs in the Commons yesterday, “we can’t save every business” and “we can’t save every job”.

The Self-Employed Income Support Scheme (SEISS) will also be extended for six months, but limited to those actively trading and hit by Covid-19.

It will be paid in two taxable grants, with the first covering 20 per cent of average monthly profits over November to January, capped at £1,875. The second has yet to be confirmed.

Some £363m had been paid out to self-employed people in Northern Ireland under the scheme to date.

Rishi Sunak also confirmed an extended VAT cut from 20 per cent to 5 per cent for hospitality and tourism sectors will be extended until the end of March.

Elsewhere, businesses will be given more flexibility to repay government backed loans.

Last month it emerged that £809m in bounce-back loans had been paid to 25,491 businesses in the north during the pandemic.

They’ll now get 10 years, rather than six, to repay the loan, bringing monthly repayments down. Firms can also secure a six-month freeze on repayments.

The UK Government will also extend its guarantee for the Coronavirus Business Interruption Loan Scheme (CBILS) to 10 years, with applications extended until the end of November.

Some 836 larger Northern Ireland firms have taken out £238m under the CBILS.

Finance Minister Conor Murphy welcomed the JSS and extended VAT cut, but said he would be seeking clarity over some concerns with the chief secretary to the Treasury Steve Barclay on Thursday afternoon.

Mr Murphy also said the Chancellor’s decision to cancel the Autumn Budget will make it more difficult for the Executive to develop its own spending plans.

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