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Chancellor’s measures should avoid ‘cliff edge’ at end of October

PUBLISHED: 13:00 30 September 2020

Self-employed people whose business is still Covid-affected will receive only 20pc of previous profits under the extended Self-Employed Scheme, making them significantly less protected than they were previously   Picture: Getty Images/iStockphoto

Self-employed people whose business is still Covid-affected will receive only 20pc of previous profits under the extended Self-Employed Scheme, making them significantly less protected than they were previously Picture: Getty Images/iStockphoto

Archant

Rishi Sunak’s Winter Economy Plan is welcome, but won’t protect every job, says Shaun Davison of Lovewell Blake.

Shaun Davison from Lovewell BlakeShaun Davison from Lovewell Blake

The cancellation of the Budget and its replacement with last week’s announcement of a package of emergency measures to protect jobs and help businesses through the months ahead shows that the lobbying to avoid the ‘cliff-edge’ when the Job Retention Scheme closes at the end of October has been heard.

Mr Sunak has repeatedly said that the taxpayer cannot continue supporting unviable jobs forever. While his long-term focus is sure to be on rebuilding the economy, these measures were more short-term in focus, all about trying to protect existing jobs as the second Covid-19 wave hits.

The Job Support Scheme is, as expected, a mirror of the French and German schemes, although lasting just six months, it is considerably smaller in scope. Although the government will subsidise the wages of those working shorter hours, the major burden falls on the employer, unlike furlough.

Commentators have pointed out that a business with an employee working one-third hours will pay 55pc of their salary, so it will be considerably cheaper to employ one full-time worker than two or three part-time workers. It remains to be seen how effective the scheme will be at avoiding redundancies.

What it will do is enable employers to retain key employees for whom there is currently insufficient work, but who may be vital to the business’s recovery post-Covid.

The extended Self-Employed Scheme is similarly limited in scope. The first two tranches paid 80pc and 70pc of profits; the new scheme pays just 20pc (similar to the Government’s maximum contribution to the Job Support Scheme). Self-employed people whose business is still Covid-affected will therefore be significantly less protected than they were previously.

The opportunity to further defer VAT and self-assessment payments by setting up payment schemes is good news, but every time a tax bill is deferred, the debt doesn’t go away. Rather more eye-catching is the ‘Pay As You Grow’ idea, giving businesses more flexibility to pay back Bounce-Back and Business Interruption Loans, giving up to 10 years to pay them off. This kind of longer-term thinking will be important for a sustained recovery.

The package announced last week will be welcome news for businesses fearing a cliff edge at the end of October. It won’t protect every job, but it may make the difference for positions which are viable for the long-term – and that will be vital for our economy’s eventual return to health.


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