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Furlough 3.0 welcomed but scheme falls short

The Chancellor announced a limited extension to the Job Support Scheme, extending this to business premises required to close.  Although not described in this way, this can be seen to be Furlough 3.0, following on from the Chancellor’s first iteration in March and Furlough 2.0 brought in from July.  Chris Sanger, EY’s Head of Tax Policy, comments

“This furlough scheme is designed those businesses directly affected by the local lockdown restrictions in a bid to avoid a winter of discontent. The scheme is a six-month plan providing the Chancellor with an opportunity to review its deployment at the halfway mark.

“The move by the Chancellor, just a few weeks after his announcement on the updated Job Retention Scheme, demonstrates his agility to respond the ever-changing demands of the pandemic brings and supports his mantra of doing whatever it takes to support the economy. Whilst we may not have a Budget this Autumn, with all these incremental policy announcements the Chancellor may well end up delivering far more change in this half year than a Budget would normally deliver.

“However, has he gone far enough by only supporting those that fall in the geographical boundaries of the local lockdown and those explicitly required to close?

Supply chain support?

“The support for those businesses which are forced to shut as a result of the lockdown measures, such as bars and restaurants, is of course to be welcomed but the scheme fails to acknowledge and support businesses in the supply chain which support those closed businesses. Those suppliers are now faced with the prospect of having their customers taken out of the supply chain, but aren’t themselves forced to shut and hence have no access to the benefits of the new scheme.

 

Beyond the county line

“The economic impact of the local lockdowns permeates further than just the immediate area impacted. Many businesses just outside those areas affected are likely to be significantly impacted economically but will have no way of accessing the much needed support available to those that fall in the geographic areas.

 

A welcome boost for those forced to close; not as generous as the Furlough 1.0 but more than now or the JSS

“Under the original furlough scheme, 80% of an employee’s wages was paid by the government with the employer not required to contribute anything. This was later restricted to 60%, with the employer picking up the employer National Insurance Contributions and pension obligations.

“Under the new scheme, employees will receive two thirds of their wages up to £2,100, which is fully funded by the government, other than the  employer National Insurance Contributions and pension obligations.

“Hence, employees will be slightly worse off than under the current scheme and employers will contribute slightly less that they do now. This again indicates that the Chancellor is seeking to refine his approach to these situations.

“Those businesses that have been forced to close, such as nightclubs, dancehalls and discos, will see this as a welcome lifeline, allowing them to retain their staff, ready to re-open by lockdown restrictions are lifted.

“One innovation in this version is the publication of a list of employers using the scheme.  Employees will be able to find out if the employer has claimed for them under scheme and there will be a hotline for employees who believe that their employer is claiming fraudulently to notify HMRC. 

Generous but some may have to wait two weeks to benefit

“The new scheme kicks from until 1 November, aligned with the expiration of the existing Furlough Scheme.  However, some current employees may not be eligible under the current scheme (for example due to being employed after 19 March) but will be eligible for the new scheme.  These employees may well feel that they have fallen through the cracks between the two regimes and the Chancellor may want to consider bringing in the regime early for this cohort of employees.

“Similarly, those businesses currently in lockdown, such as those in central Scotland, which are now receiving 60%, may well question why this lockdown provision is not backdated, particular as businesses in other areas, such as London, which may be required to close due to lockdown post 1 November, will receive 67%.”

 

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