UK helps employers with slow phase-in of job shield costs
By William Schomberg and David Milliken
LONDON (Reuters) - British finance minister Rishi Sunak offered fresh help to employers hammered by the coronavirus shutdown on Friday in the form of a gradual phase-in of contributions by them to the government's hugely expensive wage subsidy scheme.
The government has been paying since March 80% of the wages of workers who are temporarily laid off, and who now total 8.4 million, to limit a surge in unemployment.
In August the companies will have to resume pension and social security payments, building up to 10% of wage costs in September and 20% in October, a lesser requirement than reported by media before the announcement.
Sunak also brought forward to July 1 the start of part-time work under the programme, a demand of businesses seeking to rebuild gradually. He extended another multi-billion-pound income scheme for self-employed workers as well.
"Now, as we begin to re-open our country and kickstart our economy, these schemes will adjust to ensure those who are able to work can do so, while remaining amongst the most generous in the world," he said.
Although common in other European countries, the income support schemes represented a big shift for the traditionally free-market Conservative Party when they were launched in March as the coronavirus crisis swept the world.
Len McCluskey, leader of the Unite trade union, welcomed Friday's changes but called for more help for the hardest-hit sectors such as aviation and hospitality.
"Without such assistance, and soon, many businesses will simply shut up shop, resulting in the mass unemployment the chancellor has sought to avoid these past two months," he said.
The cost of the two income programmes was now likely to shoot past 100 billion pounds, the Institute for Fiscal Studies, a think tank, said, about as much as for the National Health Service over the same March-October period.
Sunak declined to say whether he would bring forward his next budget statement, due in the autumn, to spell out how he will tackle Britain's surging debt.
BIG HELP, BIG COST
One in three private sector employees are covered by the Coronavirus Job Retention Scheme, which has already cost the state about 15 billion pounds.
It is due to expire at the end of October and Sunak said on Friday it would close for new claims on June 30.
The Bank of England says the scheme could limit a rise in the unemployment rate to about 9%, double its most recent reading but way below an estimated 20% in the United States.
Under the plan, workers are receiving 80% of their wages up to 2,500 pounds a month.
Some employers had warned they would not be able to pay 20% of the wage costs of their furloughed staff from August - as reported by media before Friday's announcement - raising the risk of a fresh surge in job losses.
The Resolution Foundation, a think tank, said even the limited contributions required from August were likely to lead to significant layoffs in the hospitality sector, in which an estimated 2 million employees are now furloughed.
Sunak said hardship lay ahead for many but the scheme was too expensive to continue indefinitely.
Britain's borrowing in April alone of over 60 billion pounds was equivalent to almost all of the previous financial year. It looks set to hit a towering 15% of gross domestic product this year.
About 2.3 million claims totalling 6.8 billion pounds have been made under the income support scheme for self-employed people which was extended with a second, slightly smaller final grant available from August.
(Additional reporting by Andy Bruce, William James and Kate Holton; Writing by William Schomberg; Editing by Hugh Lawson, Frances Kerry, Philippa Fletcher and Daniel Wallis)