Trade bodies, law firms and advice charities have broadly welcomed Rishi Sunak’s new Job Support Scheme, though some believe support is needed far beyond salaries.
From November 1, the government will support companies to pay the wages of employees who are working to avoid redundancy levels increasing. Under the new scheme, employees must work at least a third of their normal hours and will be paid for that period by their employer.
For the remaining hours not worked, the government and employer will pay one third of the wages each.
Highlighting the need for further action, Joanna Elson OBE, chief executive of the Money Advice Trust, said: “Bold though these measures are, equally bold action is needed now across a range of household costs, including on rent, mortgages and council tax to prevent difficult situations being made far worse by growing debt.
“On rent, this should include protections in the form of no-interest loans for tenants who have built up arrears as a result of the outbreak. Changes to the rules on how council tax is collected are also needed to prevent more households being pushed into financial difficulty as a result of outdated collection methods used by many councils.”
Colin Haig, president of insolvency and restructuring trade body R3, posed a series of questions about the mounting levels of corporate debt. He said: “These (support) measures can’t be prolonged indefinitely.
“What will the government’s approach be to the mounting level of corporate debt in the economy? What further flexibility will HMRC provide to Covid-hit businesses which need extra time to pay their debts?”
“Sadly, the maths simply does not support six months of sustained employment"
Musab Hemsi, partner at law firm LexLeyton, said: “Sadly, the maths simply does not support six months of sustained employment. Unfortunately, the businesses within sectors such as hospitality, leisure and events will not be saved by these measures. Workers who find themselves within industries where cashflow remains hampered or precluded by government measures are likely to lose their jobs.
“Many features of the scheme also require a great deal of clarity before it goes live. At present we do not know which companies qualify and the meaning of ‘viable jobs’ and the qualifying criteria for a ‘large employer’.
“Amongst other sectors, flexibility is going to be central to the success of this scheme.”
The need for clarification was also raised by Nigel Morris, tax director at MHA MacIntyre Hudson. He explained that there is a risk some businesses in need of support will be excluded.
"Firms having to employ these measures should be looking at ways to support employees, especially their mental wellbeing"
Morris said: “The definition and criteria will determine the success of the scheme, particularly the extent of a fall in turnover required for a larger business to qualify, and how this will be quantified, audited and proven. It’s not a fool-proof measure.
“We’ve seen some businesses ‘bounce back’ and may find they match last year’s performance or experience just a small drop in turnover. But in such a volatile economic environment this may not last; the next six months could be very different. A measure based on how they’ve weathered the storm so far may exclude many businesses from support, forcing them to make staff cuts if they predict tougher times ahead.”
Robert Marshall, managing director of WorkLife, raised questions about how workers’ wellbeing will be supported. “Firms having to employ these measures should now be looking at ways to support employees, especially their financial and mental wellbeing,” he added.
Speaking broadly about the chancellor’s winter support package, Stephen Haddrill, director general of the Finance & Leasing Association, said: “What hasn’t been addressed in today’s announcement, and what continues to be a challenge for our independent lenders, is access to funding that can then be deployed under the guarantee schemes. Our members are ready and willing to support SMEs, but they can’t do that without funds.”