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      in UK Politics

      Will Rishi Sunak’s new job support scheme be enough to avert mass unemployment?

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      Whatever you do, don’t call it an extension. Having insisted for months that the furlough scheme would end in November come what may Rishi Sunak was never going to stand up in the House of Commons to announce a simple roll-over of the emergency jobs support established earlier this year.That’s not the way politics works.
      But is the distinction between the chancellor’s new “Jobs Support Scheme” announced on Thursday and the “Job Retention Scheme” really that large?Watch moreIn some ways the answer is no. Changes to the furlough scheme since August had already required employers to make a rising contribution to the wages of furloughed workers.Any objective observer asked to place this new scheme on a policy continuum between what the chancellor unveiled in July – a £1,000 bonus for each worker brought back – and furlough would put it much closer to furlough.To that extent Labour’s shadow chancellor, Anneliese Dodds, is justified in saying that the chancellor has U-turned.Yet there are material differences between this and furlough.The level of support from the state to the payrolls of eligible companies is significantly lower. Under the new programme, the government’s maximum contribution to a worker’s wages falls to 22 per cent, down from 60 per cent under furlough. And only employees who are working at least a third of their normal hours will be eligible.The important question is of course whether it succeeds in stemming a steep rise in unemployment over the winter.
      Even before the latest restrictions official forecasts were projecting a possibility of joblessness shooting up to 4 million by early next year as the furlough scheme ended. Will the new system help avert such a disaster for the jobs market? The answer is that it’s impossible to know for sure.The new wage subsidy might persuade managers, facing downsizing decisions, to wait until the economic outlook is clearer.  The extension and rolling over of the business loan support also announced by the chancellor will probably help on that front.But other employers might look at the size of the financial support on offer from November – and the considerably darkened economic outlook – and decide that holding onto workers who they can’t employ full time would simply be to delay the inevitable.
      The sad fact is that many employers will have already made their decisions, having started their redundancy consultation processes in recent weeks.
      It’s pretty hard to see how this scheme would make a material difference to employers’ decisions in the event of another national lockdown, which ministers have warned might be needed if the spread of the virus is not arrested by the new measures implemented this week. If the Treasury has a plan to protect jobs in those circumstances it’s keeping it very well hidden.
      But that might be overly pessimistic. There’s some evidence that new coronavirus infection cases in Spain and France, which have been a few weeks ahead of the UK on the curve of this second wave of the epidemic, are slowing.  Good news on a vaccine might arrive and brighten the economic outlook.  And the fact that the new short-time working scheme has the broad support of the trade unions and the business lobby groups – and seems to have been designed with their input, as was the original furlough scheme – is a hopeful sign. Such groups are almost certainly closer to the thinking of private sector decision makers than ministers and Whitehall civil servants.Yet the bottom line is that the outlook on the employment is as clouded and uncertain as that future of the pandemic.
      The proof of this wage subsidy pudding will be in the eating this winter. More

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      in UK Politics

      Job Support Scheme: What will new scheme announced by Rishi Sunak look like?

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      The chancellor told the Commons that “there has been no harder choice then the decision to end the furlough scheme”, stating that the government “provided one of the most generous and comprehensive economic plans anywhere in the world”. While the furlough scheme is still ending in October, Mr Sunak announced that a new scheme is being introduced. But, he warned: “I cannot save every business, I cannot save every job – no chancellor could – but what we can and must do is deal with the real problems business and employees are facing now,” Mr Sunak stated.Here is everything you need to know about the new Job Support Scheme unveiled by the government.What is the new Job Support Scheme?Mr Sunak told the Commons that the new Job Support Scheme being launched by the government this autumn will help businesses keep employees on, rather than making them redundant.Read moreUnder the new scheme, the government will top up the wages of people working at least a third of their normal hours.They will be paid for that work as normal, with the state and employers then increasing those wages to cover two-thirds of the pay lost by working reduced hours.The level of grant will be calculated based on the employee’s usual salary, capped at £697.92 per month.The scheme will run for six months, from November 2020 to April 2021.Am I eligible to receive support?Anyone who is employed as of Wednesday 23 September is eligible to be covered by the scheme, said Mr Sunak.All small and medium-sized businesses are eligible to apply, but larger businesses will have to prove their profits have been hit by the pandemic.Businesses are eligible even if they did not previously use the furlough scheme.Will it stop people from being made redundant?Employers who retain furloughed staff on shorter hours can claim both the new Job Support Scheme and the existing Jobs Retention Bonus, which Mr Sunak says will “significantly increase the incentives to bring back previously furloughed employees”.Read moreThe Jobs Retention Bonus lets employers claim £1,000 for formerly furloughed staff who remain employed until at least February.Businesses will also not be able to issue redundancy notices to employees while taking part in the new scheme, and there will be restrictions on larger companies “in terms of capital distributions to shareholders while they are in receipt of money for their workers in this scheme”, Mr Sunak told the Commons.However, the chancellor has received criticism that the package came “too late”, as Labour’s shadow chancellor Anneliese Dodds pointed out many workers whose redundancy process, ahead of losing their jobs at the end of October, began last week.How does this differ from the furlough scheme?The new Job Support Scheme is not as generous as the furlough scheme, capped at £697.92 instead of the previous £2,500 the government was paying out to keep people employed.However, Mr Sunak told MPs that although his primary goal was to support jobs, this could not include maintaining posts with no viable future under the coronavirus restrictions announced earlier this week – including a 10pm curfew for pubs and restaurants in England. The scheme has been widely welcomed by business groups, but the British Chambers of Commerce warned the chancellor “must remain open to taking additional action to support parts of the economy facing unprecedented challenges over the months ahead”.What other types of support are there?The current self-employed grant will be renewed on similar terms to the new Job Support Scheme.Read moreThe grant is worth up to 20 per cent of average monthly profits for the period between November to January, up to a total of £1,875, with further sums available to cover the following three months.Self-assessment tax payments deferred from July, as well as those due in January, will not need to be paid until January 2022.Mr Sunak also announced an extension to the temporary reduction of VAT rates from 20 per cent to five per cent for the hospitality and tourism sectors for a further two months, with a new deadline of 31 March 2021.Businesses on “bounce-back loans” have had a “pay-as-you-grow” element added, which gives loanees 10 years instead of six years to repay it, a move that will slash monthly repayments by almost half, according to the chancellor.Those struggling to repay their bounce-back loans will be given the option of making interest-only payments and “anyone in real trouble” will be allowed to suspend repayments altogether for up to six months. More

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      in US Politics

      US airlines facing ‘Thelma and Louise’ moment as government aid set to expire

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      US airlines are facing what one leading analyst calls a “Thelma and Louise” moment as the industry approaches a government-funding deadline that could decide its future.On 30 September a government aid packages used to protect workers expires, the airlines have already announced huge layoffs but what comes next could be even worse.“I don’t think people get the Thelma and Louise analogy here. The car is up to speed, it’s headed toward the cliff and we know what happens next because you’ve seen the movie,” said industry analyst Robert Mann.Along with leisure and retail, the airline industry has been one of the most direly affected by the Covid-19 pandemic. Passenger numbers are down 70% and the loss of business and frequent flyer travelers has pushed revenue down by as as much as 85%.In March, airlines were offered two sources of money as part of the US government’s coronavirus stimulus package, the Cares Act. The act gave the industry $25bn in loans to cover general costs and $25bn to keep workers on payroll. The payroll cash is made up of grants that don’t need to be paid back but the loans come with strings attached.Airlines will have to give the US government some equity stake in return for the loans. Some airlines, including American, Hawaiian Airlines and Spirit Airlines have agreed to take the cash. Others including Delta, United and Southwest, have yet to decide whether they will tap the loans. More

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      in US Politics

      Of course there was PPP fraud, but the program was a crucial lifeline | Gene Marks

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      Now that the paycheck protection program (PPP) has ended, there’s a new story evolving. It seems like millions of dollars meant to prop up small businesses were fraudulently received by a bunch of bad people. Surprised? Not if you run a small business.In a press conference this week, acting assistant attorney general Brian Rabbitt announced that the Department of Justice has already charged 57 people who were trying to steal approximately $175m from the program. “The money these defendants stole was taxpayer money,” Rabbitt said. “Every dollar received was a dollar drawn from the American people’s account. Even worse, every dollar they took was a dollar we had set aside to help our fellow Americans weather one of the worst national crises in recent history. As we allege, these defendants tried to steal these funds for themselves.”The cases are something out of The Wolf of Wall Street. There’s money stolen to pay for Rolls-Royces, luxury yachts, homes and visits to strip clubs. A group in South Carolina is accused of laundering PPP money through casinos and probably using some of it to pay for heroin and methamphetamines. The Washington Post reports that an NFL player was charged with fraudulently using PPP funds to pay for Gucci and Dior items. Politico says that Rolex watches, Lamborghinis and a $3,750 diamond pinky ring were among the items confiscated from alleged abusers of the program.My goodness, who knew? Oh, that’s right. I knew. You knew. We all knew.Of course there was fraud. Anyone who applied for a PPP or an economic injury disaster loan knew this was going to happen. I have countless clients who mentioned to me just how easy it was to get approved for these grants and loans. Any business owner who claimed they were “affected” by Covid-19 could get relief, regardless of whether they were truly affected now or just worried about the future. “I could’ve told the bank anything,” one client said to me. “They didn’t care. My banker just told me to get the paperwork in and I’ll get my money.”Waiting around for government bureaucrats to come up with detailed rules and procedures would have cost much, much moreBut despite these very real scandals these government programs worked. Millions of loans were extended to small businesses that really needed them. Billions of dollars were made available – quickly – to keep many companies afloat, or at the very least provide them with a cushion to operate through these very unprecedented times.The fraud – hundreds of millions – sounds like a lot. But as a percentage of the overall program it’s probably no more or less than what my allowance is for overdue invoices that will likely not be paid. Could the fraud have been less with better policies? Sure. But waiting around for government bureaucrats – secure in their jobs – to come up with detailed rules and procedures would have cost much, much more.Of course, the political show will continue. Democrats will accuse Republicans of wasting taxpayers’ money. Republicans will argue that their actions saved the economy. Investigators will root out more celebrities and one-percenters who took advantage and present them on a platter to a hungry media looking for a tasty story.But there are bigger fish to fry … like propping up a very damaged economy. And let’s also hope that this finger-pointing circus doesn’t stop Congress from doing another round of PPP or some other type of stimulus for those businesses that really need it. Because many businesses really, really do need it. More