Chancellor Rishi Sunak today set out the government’s ongoing support for employees and businesses impacted by Covid-19.
Among the measures being introduced is the Jobs Support Scheme, which will replace furlough and will see the government top up salaries for employers who can’t afford to take back staff full time.
The scheme will run for six months from November, following the end of the furlough scheme on 31 October, allowing employees to return to work for at least a third of their hours. The government will pay for the remaining hours.
The chancellor also introduced a grant for the self-employed on similar terms. It will be available for those who were eligible for the self-employed support offered during the lockdown and will be based on three months’ worth of profits from November to January.
Bounce Back Loans aimed at boosting small businesses have been extended from six to 10 years under a new Pay as You Grow initiative.
Plus, there’s the option for businesses to pay on an interest-only basis and reassurance was offered credit ratings would not be impacted.
The government guarantee has also been extended on Coronavirus Business Interruption Loans to up to 10 years.
Hospitality and tourism sectors will benefit from a reduced 5% VAT rate until the end of March 2021.
And firms which took up the option to defer their VAT bills will be allowed to pay in 11 smaller interest-free instalments.
Tom Selby, senior analyst at AJ Bell, explained the new Jobs Support Scheme moves away from the emergency ‘furlough’ lifeline and aims to support only ‘viable’ employment.
“While this might be less generous than the furlough scheme, it at least gives some support to employees and valuable help to businesses hit hardest by lockdown measures,” he said.
“In addition, Sunak announced beefed up business loan schemes and tax cuts designed to ease the cashflow pressure on firms struggling during the pandemic. In particular, the tourism and hospitality sectors will now benefit from a reduced 5% VAT rate until 31 March.
“Taken together, these measures should help ease the pressure currently being felt by businesses and workers up and down the country. However, whether it is enough to prevent a surge in unemployment as we head into winter remains to be seen.”
What does it mean for the mortgage market?
Karen Noye, mortgage expert at Quilter, said the statement was ‘good news’ for the housing market and people planning to move house particularly as it reduced the risk of job losses.
She added: “Generally speaking first-time buyers would expect to be most affected here, both because they represent riskier borrowers with higher loan-to-value and loan-to-income ratios, but also because younger people are more likely to be working in sectors like hospitality where the risk of redundancy is significant.
“But there is also a secondary impact, because if one potential buyer finds their mortgage applications falls through then that can have a domino effect on the chain.
“So the Chancellor’s pledge to subsidise up to two thirds of a wage packet for another six months is good news for home buyers and sellers, even if they aren’t directly involved in the scheme themselves.”
She added that things could change significantly next Spring in the second quarter of 2021 when the stamp duty holiday ends this second round of job support measures fades away.
“There will likely be a drop off in house moves and mortgage applications,” she added.
Postponing the recession
Joshua Elash, director of property lender MT Finance, was less convinced about job support scheme.
“It won’t protect viable jobs in the long run, and it certainly won’t create jobs; it’s simply helping create a zombie economy,” he said.
“We should be investing these huge sums to improve and create safer travel and working conditions in a way which would leave a positive legacy.
“The Chancellor’s approach is to differ tax repayments, and to hand out cash, feeding inefficiency, which is only going to postpone and further aggravate what is going be a significant recession. This is not sustainable.”
