Sunak's winter economy plan: Job scheme, extended loans for firms

Chancellor of the Exchequer Rishi Sunak set out his plan to rescue millions of jobs and businesses from a winter crisis as the coronavirus pandemic again threatens to derail the UK economy.

In an emergency statement to Parliament, Britain’s finance minister announced that a six-month “Job Support Scheme” to subsidise the wages of people in part-time work. He also extended loans for companies hit by Covid restrictions, with extra flexibility for repayments. He also extended reduction of value added tax to 5 per cent for the hospitality and tourism industries.

Economists — and the chancellor himself — warned Thursday’s package, while saving some jobs, won’t stop a wave of redundancies when the current more generous program ends. The measures also continued to exclude a swathe of the self-employed who fell through the cracks of support programs rolled out at the start of the pandemic.

“You can’t wave a magic wand and unemployment will stop rising anymore,” Philip Shaw, chief economist at Investec Bank, said by phone. “The measures are a sensible middle ground for the government to prevent the economy falling off a cliff.”

Sunak painted a bleak picture of the impact of Covid-19, saying the disease and restrictions are likely to last for at least the next six months. While the Treasury’s primary goal remains to protect jobs, he said, the methods of doing so “must evolve.” “Our economy is now likely to undergo a more permanent adjustment,” Sunak told the House of Commons. “I cannot save every business, I cannot save every job. No chancellor could.”

Sunak scrapped his plan for a full-scale Budget in a sign of the disruption and uncertainty the resurgent virus threatens to bring to the country. Prime Minister Boris Johnson imposed fresh curbs on the public earlier this week and warned further measures may be needed in what is likely to be six difficult months ahead.