Chancellor Rishi Sunak’s employment support package will cost the taxpayer billions of pounds a month, the Institute for Fiscal Studies (IFS) said tonight.
IFS director Paul Johnson said the final cost to the Exchequer of paying up to 80% of the wages of workers whose jobs were under threat from the coronavirus outbreak was ‘unknowable’.
He said that if the support was claimed for 10% of employees it could cost the Government £10 billion over three months.
Chancellor Rishi Sunak tonight said there was ‘no limit’ to the government’s support for the economy as he announced that HMRC would cover 80% of the wages of staff they keep on up to £2,500 a month.
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Chancellor Rishi Sunak tonight said there was ‘no limit’ to the government’s support for the economy as he announced that HMRC would cover 80% of the wages of staff they keep on up to £2,500 a month
It followed criticism that his £350 billion emergency support package for the economy earlier this week concentrated on businesses but did little for their staff.
IFS director Mr Johnson said: ‘The cost of the wage subsidy package is unknowable at present but will run into several billion pounds per month that it is in operation.’
‘It is clearly a policy designed in haste and will require considerable speed and flexibility from HMRC to deliver. As a result there are obvious concerns about its design.
‘An employer with 10 employees might have enough work to keep them all occupied half time. This policy gives a very clear incentive to furlough half of them and keep half of them on full time.
‘There may also be concerns about policing this especially for owner-managed companies paying wages to the owner.’
In further measures announced tonight, Mr Sunak said the Government was deferring the next quarter of VAT payments for businesses until the end of June – providing a direct cash injection of more than £30 billion – equivalent to 1.5% of GDP.
For those who still found themselves out of a job, he said he was increasing the Universal Credit standard allowance for the next 12 months by £1,000 a year, and raising the working tax credit basic element by the same amount, at a cost of almost £7 billion.
Chancellor Rishi Sunak tonight said there was ‘no limit’ to the government’s support for the economy as Boris Johnson said he was closing pubs, cafes, bars, restaurants and gyms
Britain’s Prime Minister Boris Johnson, centre, Chancellor Rishi Sunak, left and Deputy Chief Medical officer for England Jenny Harries take part in a Coronavirus press conference, in Downing Street on Friday evening
In a direct message to employers, he said: ‘The Government is doing its best to stand behind you and I’m asking you to do your best to stand behind our workers.’
The announcement came after scientists advising the Government warned that restrictions to control the spread of the virus will need to be in place for most of a year – at least.
The Scientific Pandemic Influenza Group on Modelling said while the severity of measures could fluctuate, ‘stricter’ measures would need to be enforced for at least half of the year in order to keep cases at a level the NHS can cope with.
These could include school closures and social distancing for everyone, while less restrictive measures include isolating cases and households.
It comes as a further 39 people in England were confirmed to have died after testing positive for Covid-19, bringing the UK death toll to 177.
Mr Johnson said the restrictions on pubs and cafes and other premises would be reviewed on a monthly basis as he appealed to people to stay at home ‘as far as possible’.
‘Some people may of course be tempted to go out tonight. But please don’t,’ he said.
‘You may think you are invincible, but there is no guarantee you will get mild symptoms, and you can still be a carrier of the disease and pass it on to others.’
The Prime Minister promised a ‘massive effort’ to ensure the NHS had the ventilators and intensive care beds it needed to cope in the weeks and months ahead.
The commitment came as it emerged that a major London hospital had declared a ‘critical incident’ on Thursday due to a surge in patients with Covid-19.
In a message to staff, Northwick Park Hospital in Harrow said that it did not have enough space for patients requiring critical care.
Mr Sunak’s support package for jobs was broadly welcomed by both employers’ organisations and trade unions.
TUC general secretary Frances O’Grady said it was a ‘breakthrough’ and praised the Chancellor for showing ‘real leadership’.
Chancellor Rishi Sunak giving evidence to the Treasury Select Committee at Portcullis House in London on Wednesday
‘We’re glad he’s listened to unions and taken vital steps to support working families,’ she said.
‘Employers can now be confident they’ll be able to pay their wage bills. They must urgently reassure staff that their jobs are safe.’
British Chambers of Commerce director general Adam Marshall said it would provide ‘desperately needed breathing room’ for businesses.
‘The Government now needs to go foot-to-floor to ensure that details of the job retention scheme and loan guarantees reach firms on the ground as soon as possible,’ he said.
However, shadow chancellor John McDonnell said Mr Sunak had not gone ‘far enough or fast enough’.
‘The Government must give people the economic security to stay at home by lifting the level of statutory sick pay, but it appears that the Government hasn’t done that today,’ he said.