Chancellor Rishi Sunak is hoping its third time lucky with his latest post-furlough scheme plans. First he argued that no replacement for the furlough scheme was needed on 1 November. Then, as pressure grew, at the end of September he proposed a “Job Support Scheme”, which was more like an unemployment creation scheme. Now, the original blueprint of the disastrous Job Support Scheme is in the shredder – ten days before it was due to come into force and with many businesses already taking redundancy decisions on the basis of JSS 1.0. And this is the guy widely hailed in the press as the lead candidate to replace Johnson as Prime Minister?
What does JSS 2.0 look like? It is still a plan to support workers to move from full-time to part-time work, but this time the incentive for bosses to do this is much greater than JSS 1.0, as they now have to pay just 5 per cent of the share of wages for hours not worked, rather than 33 per cent in the old version of the scheme. Workers also need to work just 20 per cent of their hours to be applicable for the scheme, rather than the one-third proposed in JSS 1.0.
“The JSS cost to a firm of keeping a typical furloughed worker on for half of their normal hours has been reduced by 85 per cent by today’s announcement, falling from £233 to £35 a month,” the Resolution Foundation find.
There is a good chance that for some companies this will change the calculus in terms of keeping more workers on part-time rather than laying them off. Remember, for every worker they keep on, they also get the £1000 job retention bonus. We should still expect the unemployment rate to rise significantly when the Furlough Scheme ends (companies contribute nothing to the cost of furlough, whereas businesses still pay the majority of wages under JSS 2.0), but that rise will perhaps be blunted somewhat by these changes. We are still waiting for a proper job creation scheme that does not appear to be forthcoming.
The controversial part of Sunak’s announcement yesterday in relation to Scotland was the increased cash grants on offer to hospitality, leisure and accommodation businesses under tier 2 restrictions in England. Firms under “high” covid-19 restrictions will be able to apply for grants of up to £2100 a month, potentially benefiting 150,000 English businesses. There would normally be Barnett Consequentials which mean that the equivalent sum would come to the Scottish Parliament, but the Treasury has apparently told the Scottish Government that won’t be the case, as there is no specific sum attached to Sunak’s cash grants. A previously announced covid-19 funding package to the Scottish Government of £700 million has been deemed sufficient by the hedge fund Chancellor.
“It is an intolerable and unacceptable position – and deeply unfair to Scottish businesses who deserve the same open-ended commitment given to counterparts in England,” First Minister Nicola Sturgeon said in response.
Either this will get cleaned up by the Treasury at some point and the Barnett Consequentials will work their way through (possibly not in a timely manner), or there is likely to be a huge ongoing row and potentially legal action (which would be even less timely). We are likely to see announcements about a new business support scheme from the Scottish Government today. They should use the money they have wisely, targeting social need first and foremost. Unlike Sunak, Scottish Ministers don’t have the luxury of being able to make mistake after mistake while burning through cash.
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