The Chancellor’s Winter Economy Plan
From the 1st November 2020, the government is introducing a new Job Support Scheme which is due to run for 6 months in order to support employees and ideally keep them in work where otherwise they may have been made redundant.
The government’s scheme will allow employees to work fewer hours by paying one-third of their wages on top of the hours they worked. However, in order for this to work, the employer must also contribute a third towards the wage. Whilst this means that the employee would receive two-thirds of their wage for the hours not worked, it essentially means that the employer would be out of pocket with no real financial incentive other than keeping their employee in a job. For this reason alone I can see many firms not enrolling in this new scheme. For example, where a company is already struggling due to the decreased demand, they are highly unlikely to want to pay a third of an employee’s wages with no real output in return where they could use other employees full time.
The Chancellor has also announced that the Self Employment Income Support Scheme (SEISS) is to continue with the lump sum covering three months’ worth of profits, capped at £1,875. Following this grant, a new one will be issued in February 2021 to April 2021, dependant on the ever-changing circumstances COVID-19 presents.
For the hospitality and tourism sectors, the 15% VAT cut has been extended to the end of March 2021. However as people are becoming increasingly fearful of COVID-19, is a simple tax cut enough to boost business? Loans granted to the hospitality and tourism sectors can now be paid back in smaller instalments over a longer period of time on the new “Time to Pay” service. This may stop many businesses from entering cash flow difficulties and possibly bankruptcy but only time will tell as to the effectiveness. Other business sectors that have taken out a Bounce Back Loan will now have more breathing room as the payment deadline has been extended from six years to ten.
£68.7 billion has been invested in the NHS and public services with £24.3 billion being pledged since the Summer Economic Update in July. The aim of the £68.7 billion pledge has been to ensure adequate PPE coverage, free school meals for children at home and to protect the country’s most vulnerable. However, with the constant decision changing currently occurring, it is concerning to know exactly how that money is planned on being spent and if it really is helping the UK to combat COVID-19.
This Winter Economy Plan has replaced the Autumn Budget due to economic uncertainty. However, my own feeling is that this simply creates more uncertainty as to what measures are to be taken to deal with the ever-increasing national debt!