Welcome to our latest Policy Update. In these updates, The Entrepreneurs Network focuses on recent policy development and sets out (nearly) everything an entrepreneur needs to know about the topic. If you’re joining us for the first time, you can read our past updates here.
As the Job Retention Scheme draws to a close and we face continued economic uncertainty due to the prospect of further social distancing measures, Rishi Sunak unveiled his ‘Winter Economic Plan’.
The Chancellor was keen to stress that while the furlough scheme was the right policy at the time, it is no longer. While his “primary goal is [still] to support people’s jobs”, he believes that continuing furlough will create a false sense of security by keeping people in jobs that won’t be viable in the long term.
He also argued that the problem has shifted from businesses being prevented from operating due to lockdown to businesses trading under continued uncertainty and reduced demand.
In this Policy Update, we explain the new policies set out in the Winter Economic Plan Statement, including the new Job Support Scheme.
Job Support Scheme
The Job Retention Scheme will be replaced with a new Job Support Scheme. Inspired by the German Kurzarbeit short-time work scheme, it will support the wages of people working for businesses facing reduced demand. Workers participating in the scheme will need to work at least ⅓ of their current hours and be paid for that work as normal. Employees will then be paid 2/3rds of the wages they lost by reducing their hours, split evenly between employer and government.
For example, a worker previously working a 36 hour week could have their hours reduced to 12 hours a week, but be paid as if they had worked 28 hours. From the employers’ perspective, they will have only paid for 20 hours worth of work.
It will run from November to April and all SMEs will be eligible. However, larger businesses will only qualify if their turnover has fallen. Businesses can use the scheme even if they have not previously furloughed employees.
The level of grant will be calculated based on the employee's usual salary, capped at £697.92 per month.
Employers using the scheme will be able to access the Job Retention Bonus. If a previously furloughed worker is kept on through the scheme until the start of Feb 2021, over 60% of their average wage would have been covered by the government.
Support for the Self-Employed
The government is extending the Self Employment Income Support Scheme Grant (SEISS). In November, an initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus. The grant will be worth 20% of average monthly profits, up to a total of £1,875.
There will be a second grant available to cover February till April, however the level this will be set at is yet to be determined.
Pay As You Grow
Businesses that have taken out Bounce Back Loans will be able to qualify for a new “Pay As You Grow” flexible repayment scheme. Borrowers will be able to extend the loan’s length from 6 to 10 years and can apply to pay only the interest on the loan for 6 months. There will also be the possibility of payment holidays.
CBILS
Borrowers taking out loans through CBILS may also be able to extend the repayment period up to 10 years, provided their lender agrees to it.
Applications for all of the government’s coronavirus business loan schemes will be extended to the end of November.
Tax Deferrals
The 500,000 businesses who deferred their VAT bills till March 2021 will be able to repay them in eleven smaller interest-free instalments instead through the New Payments Scheme.
VAT Reductions
The temporary 15% VAT cut for the tourism and hospitality sectors will be extended to end of March next year.