Chancellor extends furlough scheme and bolsters self-employment support
Courtesy of the Institute of Chartered Accountants in England and Wales (ICAEW)
6 November 2020: The Chancellor, Rishi Sunak, has announced a five-month extension to the current Coronavirus Job Retention Scheme and increased the level of the next self-employed income support grant.
The Chancellor told the House of Commons that the Coronavirus Job Retention Scheme (CJRS) will now run until the end of March, with employees receiving 80% of their current salary for hours not worked.
The Self-Employment Income Support Scheme (SEISS) will also be increased, with the third grant covering November to January calculated at 80% of average trading profits, up to a maximum of £7,500.
Originally due to end on 31 October, the CJRS will now remain open until 31 March 2021. The scheme had already been extended to December 2020 following the announcement of a new national lockdown for England, but Sunak today told MPs it is clear the economic effects of COVID-19 will be “much longer-lasting” for businesses than the duration of any current restrictions.
For claim periods running ‘through to January 2021’ (so ICAEW presumes this means all of November and December at least and most probably January too), employees will receive 80% of their usual salary while on furlough, subject to a cap of £2,500. The CJRS extension will be reviewed in January to examine whether the economic circumstances are improving enough for employers to be asked to increase contributions.
Meanwhile, employers will be asked to continue to cover the costs of employer national insurance and pension contributions for hours not worked. According to the government: “For an average claim, this accounts for just 5% of total employment costs or £70 per employee per month.”
An accompanying policy statement provides more details on some immediate action required. Employers concerned about how to implement changes to working agreements retrospectively can be reassured that as long as they are consistent with employment law, furlough agreements made retrospectively that have effect from 1 November 2020 can support a furlough grant claim. However, these retrospective agreements must be in place on or before 13 November 2020 to be relied on for this purpose.
The government will not pay the Job Retention Bonus in February but, according to an economic factsheet accompanying the latest announcements, will instead redeploy a retention incentive “at the right time”.
The Job Support Scheme, originally due to replace the CJRS on 1 November but superseded by the furlough extension, was not mentioned in the Chancellor’s speech or the guidance, but could still be revived at a later date.
Support for self-employed
The level of the third SEISS grant was increased to 80% of trading profits covering November to January for all parts of the UK. It is calculated based on 80% of three months’ average trading profits, paid out in a single instalment and capped at £7,500.
The window for claiming the third grant will open on a phased basis from 30 November and HMRC expects to pay grants within six working days of the date of the claim.
The government also announced a raft of further measures including:
- cash grants of up to £3,000 per month for businesses which are closed
- £1.1bn to local authorities, distributed on the basis of £20 per head, for one-off payments to enable them to support businesses more broadly
- plans to extend existing government-backed loan schemes and the Future Fund to the end of January, and an ability to top-up Bounce Back Loans
- an extension to the mortgage payment holiday for homeowners
- up to £500m of funding for councils to support the local public health response.
The extension of the CJRS, SEISS grants, loans and mortgage holidays are all UK-wide, the government also confirmed.
Bank of England presents £150bn stimulus package
The furlough extension came shortly after the Bank of England launched a new quantitative easing stimulus package worth £150bn to tackle the economic fallout from tougher coronavirus restrictions. The new measures take the total amount provided through QE programmes in 2020 to £895bn.
In its Monetary Policy Report for November, the central bank said the decision reflected the launch of stricter measures across the UK, stating that COVID “continues to hit jobs, incomes and spending in the UK”, has put a big strain on UK businesses’ cashflow, and is threatening the livelihoods of many people.
The bank’s Monetary Policy Committee left interest rates unchanged at 0.1% and warned that while the government’s measures would have a significant impact on protecting jobs, unemployment would still rise dramatically, hitting a peak of about 7.75% by the summer of 2021, up from the current rate of 4.5%.