Rishi Sunak to announce new local furlough scheme

Rishi Sunak will today announce a new local furlough scheme which is expected to pay two thirds of the wages of employees who are unable to work because of lockdowns.

The Treasury has confirmed the Chancellor will be making an announcement later on how he intends to ‘provide a safety net’ for businesses which ‘may have to close in the coming weeks’.

The promise of fresh support for jobs comes as the Government prepares to unveil its new three tier strategy for local lockdowns next week.

Parts of the country which are put in the highest tier are due to be told that pubs, restaurants and cafes will have to close to slow the spread of coronavirus.

The prospect of widespread closures across the hospitality industry in hotspot areas has prompted warnings of massive job losses and fuelled calls for the Chancellor to bring forward fresh support.

However, any fresh spending announced by Mr Sunak will raise further fears about the pressure on the government finances with borrowinf already set to top £300 billion this year.

The furlough plans emerged as the Office for National Statistics announced that the UK economy grew by just 2.1 per cent in August – much lower than had been expected.

Chancellor Rishi Sunak will today unveil a local furlough scheme to help businesses hit hard by local lockdowns

The latest data published by the Office for National Statistics suggests the UK’s V-shaped recovery from the coronavirus crisis is slowing

The Office for National Statistics revealed last month that public sector debt continues to climb above £2 trillion

UK economy grew by just 2.1 per cent in August as V-shaped recovery stalled

The UK economy grew by just 2.1 per cent in August as the recovery from the coronavirus crisis stalled despite Rishi Sunak’s Eat Out to Help Out scheme.

Data published this morning by the Office for National Statistics showed that the rate of growth was much lower than the 4.6 per cent which analysts were expecting.

The 2.1 per cent figure is also massively down on the 6.4 per cent expansion recorded in July.

The numbers are likely to fuel fears that a V-shaped economic bounce back from the damage done by the pandemic is now slowing ahead of further uncertainty in the coming winter months.

The data represents a hammer blow to the Chancellor after his initiative to get more people back into restaurants and pubs by paying for half of their meals throughout August proved not to be enough to sustain the overall growth seen in July.

The ONS’s deputy national statistician for economic statistics Jonathan Athow said: ‘The economy continued to recover in August but by less than in recent months.

‘There was strong growth in restaurants and accommodation due to the easing of lockdown rules, the Eat Out to Help Out scheme, and people choosing summer staycations. However, many other parts of the service sector recorded muted growth.

‘Construction also continued its recovery, with a significant boost from housebuilding. There was limited growth in manufacturing, which remains down on its pre-pandemic level, with car and aircraft production still much lower than the start of the year.’

The Government’s original furlough scheme is due to end later this month and it will be replaced by a less generous Jobs Support Scheme.

Furlough saw the Government pay 80 per cent of a worker’s wages up to a monthly cap of £2,500.

But the JSS will only subsidise a fifth of part-time wages for workers who are in ‘viable’ jobs.

The Government has faced sustained pressure to bring forward more help for areas of the country hit by local lockdowns.

Unions have called for the original furlough scheme to be extended but reports suggest Mr Sunak has opted for a less expensive option of paying two thirds of wages.

A Treasury spokeswoman said: ‘The Chancellor will be setting out the next stage of the Job Support Scheme later today, that will protect jobs and provide a safety net for those businesses that may have to close in the coming weeks and months.’

The closure of hospitality businesses is expected to be imposed across large swathes of the north of England where infection rates are particularly high.

Steve Rotheram, the metro mayor for the Liverpool city region, is one of a number of figures to have called on Mr Sunak to extend the same level of furlough support as was available at the start of national lockdown.

He told The Times: ‘If it was right then, it certainly is now — so we need to be seeing local furlough schemes, business grants and financial support for the self-employed and those who cannot work from home.

‘Otherwise, the money spent earlier in the year to protect jobs and businesses earlier in the year will have been wasted.’

Greater Manchester Mayor Andy Burnham has warned ‘the damage to the economy of the North will be deep and lasting’ if the Government does not extend the furlough scheme.

Reacting to the news that 465 jobs are set to be lost at Manchester Airport, he tweeted: ‘The Government’s line is that these jobs are ‘not viable’. I say that they are.

‘(Without) an extension to the main furlough scheme, the damage to the economy of the North will be deep and lasting.’

The original furlough scheme is expected to cost the Government an estimated £39 billion and any further extension to local lockdown areas will see costs increase significantly.

Whitehall coffers are already under historic levels of strain amid signs that the UK’s V-shaped recovery from the pandemic is stalling.

ONS data released today showed the UK economy grew by just 2.1 per cent in August despite the Chancellor’s Eat Out to Help Out scheme.

Analysts had expected growth to be at 4.6 per cent and the actual figure represented a massive dip on the 6.4 per cent expansion recorded in July.

Public sector borrowing has been soaring this year compared to last year – with tax revenues slumping and the IFS saying £70billion has been spent tackling the coronavirus crisis

The dire state of the public finances was illustrated last month by the Office for Budget Responsibility.

The spending watchdog revealed Boris Johnson borrowed more money in the space of five months to tackle the coronavirus crisis than the government did in the entire year after the 2008 financial crash.

In a bleak 10-page analysis the watchdog underscored how deep the nation had plunged into the red.

From April to August this year net borrowing ballooned above £173billion as Mr Sunak bankrolled furloughed employees’ wages and bailed out businesses.

The eye-watering figure was a £146.9billion increase on last year and, with more than half the fiscal year still to go, smashed the £157.7billion annual record total set during the peak of the financial crisis in 2009-10 when Gordon Brown’s administration’s grappled with a global recession.

Meanwhile, Office for National Statistics data published last month showed the UK’s public sector continues to rise above £2 trillion.