A very remarkable announcement has come from the UK government. It has announced that it will pay the wages of employees who are not able to work due to the COVID-19 pandemic. This is a radical move, the purpose of which is to protect jobs of those who work in UK.
The new decision will pay 80% of the salary for staff who are kept on by their employer. It will cover wages of up to £2,500 a month.
Chancellor Rishi Sunak opined that with this unprecedented measure, the layoffs of workers due to the crisis will be averted.
The threat from the COVID-19 virus is real and catastrophic. Firms fear that they could collapse, and thousands of jobs could get wiped out. Presently, life in the UK is facing stagnancy. Mr. Sunak has already made the observation that closing restaurants and pubs would have a big impact on the UK’s business scene.
The wage subsidy will be applicable to firms that have already been compelled to lay off workers due to the pandemic. To avail the subsidy, those firms will have to bring back the workers. Instead of a layoff, the workers will have to be granted a leave of absence.
The chancellor also said that the move is meant to enable workers to keep their jobs, even if their employers are not in a position to pay them.
The wages cover will relate to gross pay. It will be backdated to the start of March and will last for 3 months. However, Mr. Sunak indicated that extending the scheme will be done if necessary.
The scheme will be run by HMRC (Her Majesty’s Revenue and Customs). It’s expected to make the first grants to businesses in a few weeks, as is known from a Treasury spokeswoman.
The Confederation of British Industry (CBI) has called the announcement “a landmark package”. Director-General Carolyn Fairbairn considers this as the beginning of the UK’s economic fightback. She said that it’s an unparalleled combined effort by the government and enterprises. It will help the UK to emerge from this crisis with the least possible damage.
The Resolution Foundation welcomed the package. The foundation appreciates that it reaches the lower-paid workers. They are the ones with the highest risk of losing jobs.
The government has, with this package, attempted to face the huge pressure on it to intervene and support workers. The imminent need of the hour is to prevent mass unemployment. This is in light of many firms losing revenue almost overnight due to anti-COVID measures.
With the wage package, the UK government aims at reducing the burden on businesses and their employees.
For the self-employed, Mr. Sunak announced increased benefits. Many of the self-employed will have to depend on it. Other measures to support and help firms and workers include:
- Small businesses granted interest-free cash
- Companies deferred from VAT payments until the June end
- Self-assessment income tax payments for July 2020 postponed for 6 months
- A hike of £20 a week done in standard Universal Credit. The same raise applied for those even now on the working tax credit scheme
- Nearly £1bn allowed for those finding it almost impossible to pay rent. This is done through increased housing benefit and Universal Credit
Capital Economics observed that the latest government intervention was crucial. Otherwise, the unemployment rate would have risen to a crisis-level of 8%.
With this move from the UK government, employers will witness something they would never imagine a UK government to do.
This scheme is now considered more generous than a few of the high welfare plans in Scandinavian countries. This package has the power to instantly transform the social safety net of the UK. It shows the right assessment of the Treasury about the sharp plunge in the size of the economy. It believes that this can be followed by a bounce-back. But the bounce-back is not possible if millions get ruined by unemployment.
The chancellor Mr. Rishi Sunak was given the opportunity for this in part by the biggest ever announcement made by the Bank of England. It has announced to purchase government debt.
With the help of UK’s banks, the employers will soon begin to get the benefits of this new package.
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