One immediate victim of the new restrictions was the 2020 budget statement which Chancellor Rishi Sunak was due to make next month. It has now been postponed to next year. This is a symbolic recognition that the role of the budget as originally envisaged, namely to reset the economy and set it on the road to recovery after the pandemic has been brought under control, is no longer relevant. For now the government remains in crisis management mode and economic planning has to reflect that fact. The Chancellor confirmed as much when he spoke to Parliament on Thursday, saying that although the furlough scheme was the right thing to do at the time back in March it now needed to change. He struck a note of caution when he said that 'I cannot save every business, I cannot save every job'. This comes after economic data just released showed a slowdown in the recovery after several months of improvement. Whilst restaurant sales appear to be holding up, other parts of the hospitality sector such as pubs and cinemas are not doing so well. The increased restrictions on opening pubs just announced will obviously not help this situation to improve.
The Chancellor announced that a different type of furlough would be put in place now. Going forward, the government will support the lost wages of employees who return to work on a part-time basis, picking up two-thirds of any shortfall (the employer will be required to pay the balance). The focus will be on small and medium-sized businesses; larger entities are only eligible if they can demonstrate that their turnover has fallen due to the pandemic. To be eligible employees must work for at least a third of their normal hours. Part of the not-so subtle messaging here is that businesses and employees which have no obviously viable long-term future in the current scenario will no longer be supported. There will inevitably be some jobs and businesses that do not survive as a result. The self-employment income support scheme will also be extended though at much lower levels of payment than before. Other measures include changing the conditions around the government's 'bounce back loans'. These will now be repayable over ten years rather than six. The Chancellor labelled this as a 'pay as you grow' scheme. If businesses do not have sufficient cash to make planned capital repayments they may for a time defer them and pay interest only. In some cases, they may even stop making these for up to six months. There will be a new loan guarantee scheme from January. VAT payments that have been deferred and were previously due to be repaid in March 2021 may now be paid over a longer period in smaller and more manageable amounts. Hospitality, which the Chancellor says supports 2.4 million jobs, was picked out for special mention: in particular VAT rates, which have been cut to 5% in the sector but were due to go back to 20% again in the near future, will now not do so until the end of March 2021.
More details will emerge in the days and weeks ahead. Already, supporters of the government are lining up to support the plans whilst opponents are criticising them for being reactive, saying that they have been asking for measures to be introduced for weeks and that the government is acting reactively and not going far enough. It is likely to be another uncomfortable period ahead as political point-scoring is made for and against (a situation not all eased by ongoing uncertainties over Brexit). In the meantime we must all hope – regardless of individual political affiliations – that the measures taken both in public health and economic terms work. Our personal and collective futures are highly dependent on it.
Wayne Bartlett is an author for accountingcpd. To see his courses, click here.
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