Rishi Sunak considers German-style wage subsidy scheme
Chancellor Rishi Sunak is weighing up a new scheme to subsidise workers’ wages to replace furlough, perhaps along the lines of the German short-time work scheme, as he tries to limit the economic impact of the latest coronavirus restrictions.
It comes after Prime Minister Boris Johnson implemented new rules that will see pubs shut at 10pm, people working from home if possible and indoor sports banned.
Much of the government’s economic support for companies and individuals is set to end in the autumn, however. The furlough scheme it scheduled to wind down in October and the deadlined for business loans is this month.
However, the Guardian and Financial Times reported that Sunak is drawing up new stimulus plans. Citing sources, both said no decisions had been taken but that a few options were on the table.
One is something akin to Germany’s Kurzarbeit or short-time work programme. Under the scheme, companies would pay workers’ wages for the time they are at work. The government would then cover the wages for the time when the company has no work for the employee.
Sunak has decided at the last moment to delay an extension to the coronavirus loan programmes in favour of drawing up a wider support package, the Guardian said, citing business sources. The Treasury has been contacted for comment.
The Treasury is looking at systems that would be cheaper than the current furlough scheme. It would like workers to do at least 50 to 60 per cent of their normal hours, the FT reported.
The furlough scheme has cost the government more than £39bn and supported around 10m jobs.
CBI and TUC chip in on furlough
But as it comes to an end, business groups, trade unions, think tanks and opposition parties have lobbied the government for extra support.
Dame Carolyn Fairbairn, CBI director general, yesterday called the new Covid restrictions a “crushing blow”. She said “thousands of firms, particularly in city centres and for our hospitality sector employing over 4m people,” would be hit hard.
The CBI has suggested subsidising firms if they could offer workers 50 per cent of their normal hours. The company would pay for the hours worked. But the rest would be split between the Treasury, the company and a third would be lost by the employee.
Frances O’Grady, general secretary of the Trades Union Congress (TUC), said: “It’s clear that this pandemic will not be over by Christmas – so neither should state support for jobs.”
The TUC has suggested a more generous scheme under which workers would get 80 per cent pay for the time they are not working, rising to 100 per cent if they are on minimum wage.