Rishi Sunak forced to offer multibillion-pound job package as Covid fears mount

Richard Partington, Heather Stewart and Simon Murphy
·10-min read

Rishi Sunak was forced into unveiling a last-minute multibillion-pound package for business and workers amid fears of mass unemployment and anger over lack of government support.

Moving to appease worried hospitality sector leaders and northern Tory MPs as more parts of the country are put under stringent coronavirus measures, the chancellor said he would expand the new furlough scheme to protect jobs through a difficult winter.

Shortly after he announced the plans, the health secretary, Matt Hancock, revealed that Coventry, Stoke-on-Trent and Slough would be moved into tier 2 restrictions at the weekend. Nottingham is braced for the most severe tier 3 curbs in the coming days.

Despite business groups and thinktanks having pointed to flaws in the chancellor’s flagship Job Support Scheme (JSS) upon its announcement a month ago, Sunak claimed he was responding to the changing epidemiological picture with the fourth major economic update in as many months.

“Just as we have throughout this crisis, we will listen and respond to people’s concerns as the circumstances evolve,” he told a Downing Street press conference, conceding that business were struggling under the “cumulative weight of all these new restrictions”.

The UK recorded 21,242 new coronavirus cases on Thursday and there were 189 further deaths from the disease. Public Health England data suggests that cases stabilised last week for the first time in seven weeks, although the number of people being admitted to hospital increased.

The chancellor said he would significantly expand the JSS to pay a larger share of workers’ wages than initially planned, alongside more money for the self-employed and grants for businesses in areas affected by local lockdowns.

With just over a week to go before the launch of the JSS, which will replace the furlough programme from the start of November, the chancellor said he would reduce the level of employer contributions required to access the support to 5% of a worker’s usual wage, down from a previous level of 33%.

The government will also cut the number of hours an employee must work before a company can benefit, to one day a day (20%) from 33%, to allow more firms to use the system.

Offering a broader funding package in response to anger from Conservative MPs in northern seats, where tougher lockdown restrictions have been used for several months already, Sunak said grants worth up to £2,100 per month would be offered to businesses, with the cheques available to be backdated until the start of August.

Designed primarily for firms in the hospitality, accommodation and leisure sector, which have been hit hard by restrictions on opening and a ban on households mixing inside in some areas, the Treasury said the grants – when added to support for local authorities moving into tier 3 restrictions – would be worth more than £1bn.

It said the funding could help 150,000 firms in England, including hotels, restaurants and B&Bs that are not legally required to close but are suffering regardless.

Sunak’s statement came days after talks with the mayor of Greater Manchester, Andy Burnham, ended acrimoniously over the region entering the highest, tier-3 level of Covid restrictions, with the two sides just £5m apart over a deal.

Burnham said many of Sunak’s latest initiatives were exactly what he asked the government for when talks broke down earlier this week, telling MPs he had been left “open-mouthed” by the news.

Speaking alongside Sunak in Downing Street, the prime minister insisted that the new support scheme was unrelated to the fraught talks over funding for regions facing tier-3 curbs.

“The negotiation between regional leaders, between metro mayors, was all about fairness. It was about making sure everybody got the same package. What we’re trying to do now is to address a national issue,” he said.

He presented the government’s approach of using regional restrictions to clamp down on the virus as a “balanced approach” between advocates of a laissez-faire approach and those who want to “lock the whole place down from John O’Groats to Lands End, turn the lights out, shut up shop”.

Tier one – medium

  • The “rule of six” applies, meaning socialising in groups larger than six people is prohibited whether indoors or outdoors.

  • Tradespeople can continue to go into a household for work and are not counted as being part of the six-person limit.

  • Businesses and venues can continue to operate but pubs and restaurants must ensure customers only consume food and drink while seated, and close between 10pm and 5am.

  • Takeaway food can continue to be sold after 10pm if ordered by phone or online.

  • Schools and universities remain open.

  • Places of worship remain open but people must not mingle in a group of more than six.

  • Weddings and funerals can go ahead with restrictions on the number of people who can attend (15 and 30 respectively).

  • Exercise classes and organised sport can continue to take place outdoors, and – if the rule of six is followed – indoors.

Tier two – high

  • People are prohibited from socialising with anybody outside their household or support bubble in any indoor setting.

  • Tradespeople can continue to go into a household for work.

  • The rule of six continues to apply for socialising outdoors, for instance in a garden or public space like a park or beach.

  • Businesses and venues can continue to operate but pubs and restaurants must ensure customers only consume food and drink while seated, and close between 10pm and 5am.

  • Takeaway food can continue to be sold after 10pm if ordered online or by phone.

  • Schools and universities remain open.

  • Places of worship remain open but people must not mingle in a group of more than six.

  • Weddings and funerals can go ahead with restrictions on the number of people who can attend (15 and 30 respectively).

  • Exercise classes and organised sport can continue to take place outdoors but will only be permitted indoors if it is possible for people to avoid mixing with those they do not live with (or share a support bubble with), or for youth or disability sport.

  • Travel is permitted to amenities that are open, for work or to access education, but people are advised to reduce the number of journeys where possible.

Tier three – very high

  • People are prohibited from socialising with anybody they do not live with, or have not formed a support bubble with, in any indoor setting, private garden or at most outdoor hospitality venues and ticketed events.

  • Tradespeople can continue to go into a household for work.

  • The rule of six continues to apply to outdoor public spaces, such as parks, beaches, public gardens or sports venues.

  • Pubs and bars are only permitted to remain open to operate as restaurants, in which case alcohol can only be served as part of a substantial meal.

  • Schools and universities remain open.

  • Places of worship remain open but household mixing is not permitted.

  • Weddings and funerals can go ahead with restrictions on the number of people attending (15 and 30 respectively) but wedding receptions are not allowed.

  • The rules for exercise classes and organised sport are the same as in tier 2. They can continue to take place outdoors but will only be permitted indoors if it is possible for people to avoid mixing with people they do not live with (or share a support bubble with), or for youth or disability sport. However, in Merseyside, gyms were ordered to close when it entered tier 3.

  • Travelling outside a very high alert level area or entering a very high alert level area should be avoided other than for things such as work, education or youth services, to meet caring responsibilities or if travelling through as part of a longer journey.

  • Residents of a tier 3 area should avoid staying overnight in another part of the UK, while people who live in a tier 1 or tier 2 area should avoid staying overnight in a very high alert level area.

The changes came after Sunak met representatives from the hospitality industry, business groups and the TUC on Thursday morning at a Franco Manca pizza restaurant at Waterloo in London, in an attempt to patch up relations with industry as growing numbers of firms come under pressure.

The Treasury insisted that the meeting did not flout lockdown rules because the branch was “not a functioning restaurant at the time”.

Kate Nicholls, chief executive of the UKHospitality lobby group, which represents restaurants, pubs, bars and hotels, said: “This is a hugely generous package of support and very welcome news just when we needed it.

“The changes to the JSS will help to safeguard hundreds of thousands of jobs and the grant support will provide a crucial lifeline for businesses struggling with low footfall and ongoing costs. It is excellent that the grant has been backdated to when the restrictions began to bite.”

However, critics attacked the government for waiting until the 11th hour to ramp up the level of support for businesses and workers, warning that jobs will have been lost and that not enough help was available for people who had already fallen out of work.

The shadow chancellor, Anneliese Dodds, accused the government of presiding over a “patchwork of poor ideas rushed out at the last minute” in recent months. Highlighting the plight of parts of the country that have had to endure tier 2-level restrictions “without adequate support”, she lambasted Downing Street’s approach.

“How many jobs have been lost, Mr Speaker, because of that inaction? Over a million have already gone,” she told MPs, adding: “Last quarter, we saw a record rise in redundancies. The chancellor could have done much more if he had acted sooner.

“And now we see yet another last-minute move. Let me ask the chancellor, what’s changed? What’s changed that means this is the right thing to do now but it wasn’t when parts of the north and Midlands entered tier 2 many weeks ago?”

New job support scheme

She added: “This is becoming like a long-running television show. The winter economy plan, series three. But, you know, the twist is, it didn’t last the winter, it didn’t do enough to help the economy and it wasn’t a plan. We’ve got to get ahead of this crisis, instead of always running to keep up. That’s why Labour’s called for a national circuit breaker to give the chance to reset, to fix the broken test, trace and isolate system.”

The expansion of the JSS comes just under a month after the chancellor first announced the plan to subsidise workers’ wages, mimicking a similar system of support for short-time working used in Germany. Under the original scheme envisaged by the chancellor, the state would have paid a third of a workers’ wages, and their employer another third.

However, experts warned from the moment the JSS was first announced that it would do little to prevent a tsunami of redundancies over the winter because the level of employer contribution had been set too high.

Alongside the expansion of the JSS, the chancellor increased the amount of profits covered by its new self-employed grant schemes, from 20% to 40%, meaning the maximum grant will increase from £1,875 to £3,750.

The Treasury said this was a potential further £3.1bn of support to the self-employed people through November to January, with a further grant to follow covering February to April.