Winter Economy Plan summary by Owen Kyffin

Sep 29, 2020

Last week the Chancellor Rishi Sunak bowed to what must have become inevitable and replaced the Autumn Budget with a series of more short-term measures, intended to address some of the immediate challenges faced by businesses trying to operate in the current difficult circumstances. 

It’s not hard to see why he did this. The Budget sets goals for the longer-term trajectory of the economy and financial system. This would be very challenging, if not impossible to do when we are having to change how a business operates on an almost daily basis to try and adapt how we live to the current crisis.

The Job Support Scheme (JSS)

With the furlough scheme due to end next month and local lockdowns on the up, it was becoming increasingly clear The Chancellor would need to try and offer some sort of ongoing support to employers who are struggling to operate on anything like a normal basis. To this end, he announced a new job support scheme to start on 1 November 2020 and continue for six months.

To qualify, employees must work at least a third of their normal hours, for which they’ll be paid in full by their employer. For ‘normal hours’ they don’t work, the cost will be split three ways – the state pays a third, the employer pays a third and the employee loses a third. Clearly, this is welcome and will help some employers, but it will cost the employer as well.

The cost to employers of the job support scheme

As the Resolution Foundation has noted, it would cost an employer 33 percent more to employ two people half-time on the JSS than it would to employ one person full-time (at an assumed salary of £17,000 a year). So, whilst an employer might want to keep two employees on part-time to have them there for when trade picks up, simple economics might force him to let one of them go. As ever there is no alternative to going through the number-crunching exercise.

Additionally, the JSS sadly offers no assistance whatsoever to those businesses unable to trade at all e.g. event organisers and similar businesses.

Self Employed Income Support Scheme (SEISS) grant extension

Rishi Sunak also announced an extension to the SEISS. The extension will provide two grants and will last from November 2020 to April 2021. Grants will be paid in two lump sum instalments, each covering a three-month period. Again, this is welcome, but the levels of support are significantly reduced.

Further measures announced

Other measures of support have been targeted at helping with cash flow, which includes:

  • An extension to the deferral of when income tax bills become due.
  • Extensions to the Coronavirus Business Interruption Loan Scheme (CBILS).
  • An extension to the temporary VAT cut for hospitality and tourism to the end of March 2021.
  • Allowing VAT payments, originally deferred until March 2021, to be paid over 11 months rather than all at once.

These measures are all welcome in as much as anything to help struggling businesses, and whilst delaying payment deadlines into the future doesn’t reduce costs, it will ease cash flow.

However, I remain concerned that nothing seems to have been done to help either those whose business is unable to trade at all at present or indeed those who fell through the cracks in the original support schemes.

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