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
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.’
It came amid reports that Mr Sunak is considering introducing a UK-wide carbon tax to raise billions of pounds in revenue for the Government and push the country towards a target of net zero emissions.
The UK is currently part of an EU emissions trading scheme but it will cease to be a member at the end of the transition period in December.
The Times said Mr Sunak is weighing up replacing it with a UK tax system with sources claiming the Chancellor saw it as a way of ‘raising revenue while cutting emissions’.
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.
The bitter battle between Team Health and Team Wealth: ANDREW PIERCE has the inside story on the rift between Rishi Sunak and Matt Hancock
He is one of the most powerful and popular figures in the Government, but Chancellor Rishi Sunak chose not to attend the Cabinet sub-committee meeting to discuss an overhaul of local lockdown rules on Monday afternoon.
Instead, he dispatched a junior minister, John Glen, to repeat his vehement objections to the ‘traffic light system’ of restrictions proposed for 13 million people in the north of England.
Instead of introducing yet more complicated curbs, Sunak’s view is that the Government should be plotting a clear path back to ‘normality’ to prevent further devastation to the economy.
For an hour the argument went backwards and forward, with Cabinet Office minister Michael Gove chairing the virtual proceedings from his office. When the meeting ended, Glen told his boss ‘there had been a good and lively discussion’ but no decision had been taken.
Chancellor Rishi Sunak (pictured) chose not to attend the Cabinet sub-committee meeting to discuss an overhaul of local lockdown rules on Monday afternoon
Westminster sources are pointing the finger at Health Secretary Matt Hancock (pictured) who since the start of the pandemic has made much of putting the health of the nation before the economic wealth
So it came as a surprise to the Treasury team on Tuesday morning to see headlines and hear news bulletins trumpeting that the Government was pressing ahead with its traffic light system regardless of some senior ministers’ objections.
The Chancellor was furious. ‘If a decision was going to be taken at that meeting I think it’s fair to assume that Rishi would have gone in person,’ one senior Tory MP confided.
Leaked documents suggest the PM is poised to unveil a new three-tier system of lockdown measures
So what went wrong?
Westminster sources are pointing the finger at Health Secretary Matt Hancock who since the start of the pandemic has made much of putting the health of the nation before the economic wealth.
Had he briefed journalists that the traffic light system was a fait accompli, out-manoeuvring the Chancellor?
Whatever the truth the rift between Sunak and Hancock is increasingly being felt across the Cabinet, with Business Secretary Alok Sharma and International Trade Secretary Liz Truss just two of those lining up behind the Chancellor.
The role of Michael Gove, a free market Brexiteer, is also the subject of much speculation at Westminster. Before Boris Johnson was hospitalised in April, it was widely reported that Gove was emerging alongside the Chancellor as a ‘hawk’, arguing for a swift exit from the lockdown.
But, like the PM himself, it is reported that he’s changed his mind and is now in the doves’ corner – along with Hancock –arguing in favour of localised lockdowns. One source close to Gove suggests it is rather more nuanced than that.
‘He sees his role as to try to facilitate a Cabinet consensus for the Prime Minister’s position.’
And as for the Sunak vs Hancock scenario?
‘It’s not unusual for different secretaries of state to argue for their sectors,’ according to another senior source. Perhaps.
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
But there are suspicions that the Treasury took revenge with reports yesterday that the Chancellor was demanding clearer guidelines and more transparency on decision-making before lockdown is triggered.
It is common knowledge that Sunak has serious reservations about plans to shut down pubs and restaurants in northern England next week – a policy championed by Hancock.
Of course, Rishi Sunak, 40, has one eye on voters in the so-called ‘Red Wall’ in the former Labour heartlands of the North and the Midlands who delivered the 2019 election victory.
He has the most prominent Northern seat – Richmond in Yorkshire – of any Cabinet minister and is positioning himself as their champion and as a future leader of the party.
At 42, Matt Hancock is no less ambitious. He ran for the Tory leadership last summer but quit after the first round after securing a modest 20 votes.
For the moment though, Sunak has a definite edge, In successive polls, he emerges as the most trusted minister.
On the Conservative Home website this week, he was given an approval rating of 82 per cent – some 12 per cent ahead of his nearest rival. Hancock was on minus 3 per cent.
‘Do not underestimate the rivalry between these two’ said one senior source last night.
‘It’s all going horribly wrong for Hancock who can appear tetchy and bumptious. Test and trace is a mess and the lockdown which he advocates doesn’t seem to be working.
‘Rishi is a consummate Commons performer and when he talked about “living with the virus and not fearing it” his stock soared even higher. But it’s easy to be popular when you’re giving money away. The real test for Rishi will come when the furlough scheme ends and unemployment starts rising sharply.’
Watch this space!