england, their england

New bail-out for UK corporations as COVID-19 infections rocket
Robert Stevens, WSWS, Sep 26 2020

Rishi Sunak with Frances O’Grady, Gen Sec of the TUC and Dame Carolyn Julie Fairbairn,
Dir Gen of the CBI, Sep 24 2020 (Photo: Frank Augstein/AP)

Friday saw the highest ever number of daily COVID-19 cases in the UK throughout the pandemic, 6,874, with 34 deaths announced. This topped Thursday’s record of 6,634 new infections, along with 40 deaths. These infection rates are double those recorded a week ago. Yesterday’s total would have been higher still, but Scotland’s figures, which has seen a huge surge in infections fuelled by children and students returning to classroom and lecture halls, were not available due to a power cut at the National Records of Scotland. The government’s Scientific Advisory Group for Emergencies (SAGE) upped its estimate of the R (Reproduction) value of the virus to between 1.1 and 1.5. London joins the North East and North West of England as having the highest growth rates of the virus in the country. Separate data from Kings College London (KCL) and the Office for National Statistics (ONS) showed a more realistic 9k to 16k newly infected each day. KCL runs the COVID Symptom Tracker mobile app, which estimates at least 16,310 daily COVID-19 cases in the last week, more than double last week’s estimate. London, with a population of nearly 10m, is on the brink of being locked down and will be added to the COVID-19 watch-list, with its 32 boroughs classed as “areas of concern.”

Hospitalisation rates for COVID-19 in the capital tripled within a fortnight to 33.4 by Sep 18. Over 13m people are living under local lockdown. Wales’ two largest cities, Cardiff and Swansea, will go under lockdown on Saturday. This will bring half the Welsh population (1.5m people) under lockdown. In England, different households were banned from meeting in private homes or gardens from midnight Friday in Leeds, Stockport, Wigan and Blackpool. COVID-19 is on the rise among all age groups. The highest rates of infection, unlike the initial months of the pandemic, are among those aged 17–24. An 18-year-old was among those who died on Thursday. Food processing plants have been some of the main vectors for the spread of the virus. On Thursday, a factory worker at the Aunt Bessie’s factory in Hull was confirmed to have died, with coronavirus suspected as the cause, only two weeks after a coronavirus outbreak among the 400-strong workforce. The following day the entire East Yorkshire region of England, including Hull, was put at “amber level” after a leap in cases. The Daily Mail reported Friday:

It is understood another [Aunt Bessie’s] employee told bosses that they were feeling unwell on Thursday, Sep 3, the day before a second staff member reported also being ill.

Despite the worker’s death and others falling ill, including one who is “seriously ill,” the factory remains open. An outbreak forced the temporary closure, earlier this week, of a Greggs bakery factory in Newcastle. This is just a few weeks after Greggs was forced to temporarily shut its distribution centre, in Bramley, near Leeds, after 20 workers out of 150 tested positive for COVID-19. Three weeks ago, six workers were sent home at the Stoke on Trent factory of another of the largest bakery firms, Mr Kipling. Following the pathetic measures outlined by PM Boris Johnson Tuesday that will do nothing to prevent the spread of the virus, Chancellor Rishi Sunak delivered his delayed budget Thursday, recast as the “Winter Economic Plan.” Having flung open the economy, schools and universities, solely to allow the corporations to continue profitmaking, the government had no plan in place in the face of a public health catastrophe. Until a few weeks ago, Sunak was confidently stating that the government’s jobs furlough scheme would be ending as planned, at the end of October.

Sunak has now announced a new Job Support Scheme (JSS) in its place. But this is not being implemented for the benefit of millions of workers, whose jobs are on the line, but because big business was screaming for more state subsidies. The UK scheme will be a watered-down version of Germany’s long-established Kurzarbeit (short-time working) system, which in that country can pay up to 87% of net wages to prevent layoffs. On the day of the UK’s lockdown, Mar 23, the Financial Times lauded it with an article, “Kurzarbeit: a German export most of Europe wants to buy.” The benefits of such a state funded bailout were laid out:

Under the scheme, companies hit by a downturn can send their workers home, or radically reduce their hours, and the state will replace a large part of their lost income.

Sunak’s scheme is aiming at ensuring corporations can retain their most experienced workers. To qualify, employees will need to be working at least a third of their normal hours, to be paid fully by their employer. For the hours they do not work, the government and employer will each pay a third. The government’s contribution is capped at just £698 per worker per month. The scheme will last for only six months. For many in the hospitality and service sector, where millions of young people are employed on precarious contracts, the JSS will see their jobs gone. Three million people remain on the furlough scheme, with estimates that more than a million of these could lose their jobs when it ends. Sunak told the press:

Unemployment is already rising and will continue to rise. We have already lost 700k jobs this year.

Asked if unemployment could reach 4m in the period ahead, Sunak said, referring to estimations of unemployment rising to almost 16%, from almost 4% now:

Independent forecasts don’t make for good reading.

The Tories house organ, the Daily Telegraph, was ecstatic about the furlough scheme being “killed off” and its replacement by JSS. It editorialised that the new scheme only “supports employment that businesses judge has a long-term future. By implication, it won’t support those jobs that aren’t viable even after some subsidy.” Sunak had responded well to what the newspaper described as “capitalism’s process of creative destruction.” A “huge and devastating increase in unemployment … is about to engulf Britain, and the solution to that lies in stimulating private sector growth.”

Sunak, O’Grady and Fairbairn sharing a joke in Downing Street.

The most important political feature of Sunak’s announcement was that he unveiled it outside his office in Downing Street, flanked by Trades Union Congress General Secretary Frances O’Grady and Confederation of British Industry (CBI) Director-General Dame Carolyn Fairbairn. The event epitomised the role of the trade unions as a de facto governing partner of the Tories, in alliance with big business. From the beginning of the pandemic, the unions have worked intimately with the government in organising its multi-billion bail-out for business and then overseeing what it described as a “mass return to work” on behalf of the bosses. At the TUC Conference last week O’Grady stated, “My message to the chancellor is this: We worked together once before. We are ready to work with you again—if you are serious about stopping the catastrophe of mass unemployment.” The TUC described the JSS as “a win for unions” as the government had “bowed to pressure from trade unions and others … A National Recovery Council should now be convened, bringing together government, business and unions.” All the efforts of the TUC cannot conceal that the profit interests of the capitalists and those of workers are diametrically opposed. The Telegraph painted the real picture, with its editorial concluding:

The next few months are going to be tough: the number of hospitalisations is increasing and unemployment will rocket, inflicting mass misery.

They say a picture paints a thousand words. The two-page spread the Telegraph devoted to Sunak’s talks in Downing Street with O’Grady and Fairbairn includes a shot of them sharing a joke together, with the newspaper’s headline reading, “Wave of job losses is ‘inevitable’ in Sunak’s winter economic plan.”

The Chancellor has got the balance right
Daily Telegraph, Sep 24 2020

The Chancellor is walking a tightrope. He needs to take action to mitigate the economic effects both of the virus and the Government’s response to it. At the same time the Treasury cannot bail out the private sector indefinitely; do that, and the country’s long-term fiscal position soon veers into the disastrous. The cultural and political impact of never-ending “free money” would be equally deleterious. Hence Rishi Sunak’s announcement yesterday of a shift from paying people not to work to supporting part of the wages of employees forced to do fewer hours. In the coming weeks he will take flak for this policy because some employers will judge that it’s cheaper in the round to let people go. Nevertheless, the Chancellor has acted prudently and intelligently. He has got the balance as right as can be in the circumstances. The situation today is very different from that at the start of the pandemic. At the time, the expectation was that normality would return after a relatively short period. The Chancellor’s original interventions were designed to put the economy in deep freeze; the furlough system was aimed at keeping workers attached to their employers, ready for when the economy was unlocked again. Six months on, the tragic reality is that we aren’t returning to normality any time soon, and that swathes of economic activity are no longer viable in a climate of continuing heavy restrictions, local lockdowns and mass working from home.

Under Mr Sunak’s new Job Support Scheme, the qualifying worker must do at least one-third of their hours at normal pay, while the employer and Government will pay for the other two-thirds of the hours between them. This supports employment that businesses judge has a long-term future. By implication, it won’t support those jobs that aren’t viable even after some subsidy. Every job loss is a tragedy, but it makes sense that the Government allows the market to work by its own rhythms, reallocating resources while backing those jobs that, even under these dreadful circumstances, remain viable. The programme is more generous than the critics acknowledge because it is supported by the jobs retention bonus, an extension of support for the self-employed, better cash flow and a continuation of the VAT cut for hospitality and tourism. In the medium run, the Government will probably have to turn its attention from job-saving schemes to job creation, especially given the huge and devastating increase in unemployment that is about to engulf Britain, and the solution to that lies in stimulating private sector growth. Yet yesterday Mr Sunak managed to combine a harnessing of free-market incentives and capitalism’s process of creative destruction with an expansive support package, no mean feat.

But how is all this going to be paid for? The autumn Budget has been cancelled; useful economic projections are impossible to make. A massive tax hike would be utter madness, inconceivable, let alone from a Tory government, but the country is digging itself even further into debt. The tough choices ahead will determine the direction of the British economy for a generation, and on that front the Chancellor dropped a few hints that reassure. Asked if he agreed that the state should have to make similar sacrifices to those expected of business, Mr Sunak answered that the Government must, in future, be as “nimble and agile as possible.” We have to pay for the services we want, said Mr Sunak, but it is “better that people can keep more of their own money.” Mr Sunak described his measures as “an important evolution in our approach.” We must learn to live with Covid-19, he argued, and remember that “life means more than simply existing,” for there are always cost-benefit analyses to be made. Every policy that narrows social and economic activity to protect public health has an impact upon things that make life worth living: culture, religion, family, friendship and, of course, the economy. It was good to see Mr Sunak acknowledge the trade-offs inherent in the government’s war on Covid. The Chancellor told MPs:

We have so often spoken about the virus in terms of lives lost, but the price our country is paying is wider than that. No government can mandate behaviour to such an extent that we lose any sense of personal responsibility.

The next few months are going to be tough: the number of hospitalisations is increasing and unemployment will rocket, inflicting mass misery. Mr Sunak’s tough-love approach is at once eminently realistic, empathetic and in line with conservative principles. The Chancellor offers hope that the Government’s approach will be more flexible and balanced than in the first part of the year. As this newspaper has long argued, Britain must approach whatever challenges we face with common sense, not uni-dimensional panic.

How the Job Support Scheme, and other key elements of Rishi Sunak’s plan, will work
Harry Yorke, Charles Hymas, Christopher Hope, Danielle Sheridan, Telegraph, Sep 24 2020

Rishi Sunak’s new Job Support Scheme will require employers to pay 55% of workers’ wages even though they will only be required to complete one third of their hours. Announcing the replacement for the furlough scheme, which ends on Oct 31, the Chancellor said the Government would cover one fifth of wages for people who go back to work part-time. However, experts warned that the significant hike in employer contributions had reduced the incentive for firms to keep workers on, meaning a wave of job losses in the coming weeks appeared inevitable. Defending the move, Mr Sunak told MPs it would be “fundamentally wrong” to continue to prop up roles that no longer existed beyond furlough, adding that the wage subsidy would support “viable” jobs by allowing employees to work reduced hours over a period of “suppressed” demand. Setting out a multi-billion pound winter economic plan to help firms survive the coming months, the Chancellor also extended four of the Treasury’s state-backed loan schemes for businesses until the end of the year. The VAT cut for the hospitality and tourism sectors, introduced in July, has been extended from January to Mar 31, with firms able to spread out deferred VAT bills over 11 smaller payments. Mr Sunak (whose statement to the Commons can be seen in full in the video below) said the package would help support over 150k businesses and protect 2.4m jobs.

With furlough due to come to an end at the end of October, Mr Sunak announced that it would be replaced with a Germany-style wage subsidy that will top up the pay of people who can only work part-time. Companies will be required to fund 55% of an employee’s wages, with the Government covering 22% and the worker foregoing the remainder. It means people only able to work part time will continue to receive 77% of their normal salary. The initiative is open to workers across the UK even if they were not included in the original furlough scheme, although those who cannot return to work will not be eligible. While it is open to all small and medium-sized businesses, Mr Sunak said larger firms would be required to demonstrate that they had made losses during the pandemic in order to qualify. Firms who make use of the scheme can also claim the existing job retention bonus of £1k for every employee they take off furlough and keep until the end of January. The new scheme, which caps Government contributions to individual pay packets at £697 a month, is expected to cost £300m a month for every million employees enrolled (the graphic below shows the scheme in numbers). It represents a fraction of the cost of the furlough scheme, which has so far cost the Exchequer £39b. However, it is significantly less generous than the 80% state subsidy originally provided under furlough, which is due to drop to 60% in October. Defending the decision not to extend the furlough scheme, Mr Sunak told MPs:

The furlough was the right policy at the time. But as the economy reopens, it is fundamentally wrong to hold people in jobs that only exist inside the furlough. We need to create new opportunities and allow the economy to move forward. That means supporting people in viable jobs which provide genuine security.

Dame Carolyn Fairbairn, the CBI director general, said the latest support package would save “hundreds of thousands” of viable jobs, while the British Chambers of Commerce said it would “help many companies hold on to valued, skilled employees.” But Paul Johnson, the director of the Institute for Fiscal Studies, warned that the significant hike in employer contributions meant “there clearly are going to be a significant number of jobs lost. It is significantly less generous than the furlough scheme it replaces. A lot of workers who are currently not working at all are likely now to lose their jobs; they’re only going to get support from the Government if they are working at least a third of their hours. Torsten Bell, the chief executive of the Resolution Foundation, said low earners would be particularly impacted by the shift away from furlough, adding that many firms may simply choose to cut hours rather than top-up part time working. Rather than averting a jobs “cliff edge” when furlough ends, he said some firms could also delay announcing lay-offs until after claiming the retention bonus in January. He told The Telegraph:

It is definitely not going to prevent the rise in unemployment, particularly for low earners.

Julian Knight, the chairman of the Commons culture committee, also warned that the scheme was unlikely to prevent “unprecedented redundancies” in the arts and events industries, where many venues remain closed and staff furloughed. Asked on Thursday what incentive firms had to keep staff on, Mr Sunak told reporters:

I actually think if you look at [the Job Support Scheme] combined with the job retention bonus it provides very significant incentives for businesses to retain the staff that they had on furlough and bring them back. More generally, I think most companies want to invest in their people. If you’ve got long-term relationships with your employees, you don’t want to let them go.

However, when pressed on whether he could guarantee that unemployment would not rise to 4m, Mr Sunak said he would be “lying” if he tried to make predictions. He said:

It’s impossible for me to predict, given the uncertainty, the exact shape of the labour market. As I’ve said, I can’t save every job and I can’t protect every business.

Business loans, including the “bounce-back” and Coronavirus Business Interruption Loan Scheme (CBILS) have been extended, with new plans due in January and firms receiving up to 10 years to pay off the debt. About £15.45b has been lent under CBILS and almost 1.3m companies have borrowed more than £38b through “bounce-back” loans, with the taxpayer footing the vast majority of the bill for any defaults. Mr Sunak said he was helping out companies on their borrowing terms because they “need every extra pound to protect jobs rather than repaying loans and tax deferrals.” The Chancellor said “bounce-back” loans would be replaced with a new “pay as you grow” scheme to give firms “more time and greater flexibility to repay their loans.” Under “pay as you grow,” loans can be extended from six years to 10 years, nearly halving the average monthly repayment, while struggling companies can choose to make interest-only payments. Mr Sunak said:

Anyone in real trouble can apply to suspend repayments altogether for up to six months.

No business signing up to “pay as you grow” will see their credit rating affected. The Chancellor also said he was extending the coronavirus business interruption loans for 60k small and medium sized companies up to 10 years. He added:

I am also extending the deadline of all our loan schemes to the end of the year. And we are starting work on a new, successor loan programme, set to begin in January.

The business interruptions loans and Future Fund were due to close to new applicants at the end of this month, while the “bounce-back” deadline is at the start of November. Jing Teow, a senior economist at PwC, said:

Sustaining working capital is a business priority at the moment, and so businesses will welcome the measures such as the extension of CBILS.

Mike Cherry, the national chairman of the Federation of Small Businesses, said:

News of the ‘Pay as You Grow’ approach will mean relief for hundreds of thousands of firms, giving them the confidence to invest and hire today rather than tomorrow, providing a crucial option to suspend repayments for six months.

But Jon Kay, the director of Bury St Edmunds-based Camp Tails Doggy Daycare, said:

Pay as you grow,’ interest-only terms, additional payment holidays, it’s ultimately putting lipstick on a pig. Debt is debt, and for many small businesses struggling to bounce back in a brutal environment, it will be the final nail in the coffin

Hospitality and tourism businesses are to get a two-month extension to their VAT rate reduction in a bid to help them survive through the winter. The temporary cut, from 20% to five per cent, will now last until Mar 31, adding around £800m to the existing £2.5b cost of the measure, according to Mr Sunak. It will continue to apply only to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafes and similar premises, supplies of accommodation and admission to attractions across the UK. Mr Sunak said the extension to the VAT cut would help “support more than 150,000 businesses” through the winter, protecting some 2.4m jobs. It first came into force in July and was designed to help hotels, restaurants, cafes and pubs to shore up their finances. Some firms, however, decided to pass on the savings directly to customers by cutting prices in their outlets.

Hospitality business leaders welcomed the move on VAT but warned it did not go far enough (see video below) for a sector which has been hard hit by the Covid restrictions and faces a 50% cut in revenue from the new national 10pm curfew that came into force on Thursday. About 37,630 pubs across the English regions, and 3,118 in Wales, will be under the curfew on Thursday, according to real estate adviser Altus Group. Kate Nicholls, the UK Hospitality chief executive, said a year-long extension of VAT and a business rate holiday would have enabled the industry to plan for a recovery next year. A members’ survey predicted 560k redundancies out of a workforce of 3.2m in the next six months before the Chancellor’s package, and Ms Nicholls said she feared it would remain at that level despite the aid. she said:

The Chancellor said he wanted to save viable jobs. We are a viable sector. The only reason we are not viable is because of the restrictions the Government has imposed.

Emma McClarkin, the chief executive of the British Beer and Pub Association, said it was “great” that the Chancellor had extended the VAT reduction but added that he had missed a “golden opportunity” to extend it to alcohol in order to safeguard pubs and bars that were not food focused. She warned that the industry still faced a “cliff edge” in March, when pubs would have to pay rate bills of £25k on average, and urged Mr Sunak to consider extending business rates relief. Businesses that deferred VAT due in March to June would have the option to spread their payments over the 2021-2022 financial year, the Chancellor announced. He said:

Rather than paying in full at the end of Mar 2021, businesses will be able to choose to make 11 equal instalments over 2021-22.

More than half a million businesses deferred VAT payments in the Chancellor’s earlier package, amounting to the equivalent of a cash injection of £30b into the UK economy. All businesses that took advantage of the VAT deferral can use the new payment scheme. Businesses will need to opt in, but all are eligible. HMRC will put an opt-in process in place in early 2021. Self-employed people will benefit from an extension to the grants the Government has already provided. Freelancers who face reduced demand over the winter months will be able to apply for a grant paying 20% of their average monthly profits. The maximum payout will be £1,875, which will cover earnings lost between November and February. They will then be able to apply for another grant to cover them until the end of Apr 2021, but the Government has not yet said what the maximum payout for this will be. They will also be able to spread out their tax due in January over the following 12 months. Mike Cherry, of the Federation of Small Businesses, said this would save many from a “cliff edge.” However, MPs and trade bodies warned that the measures had failed to address the more than one million people who failed to qualify for the original support in May. Newly self-employed workers, alongside limited company directors, have fallen outside the Government’s measures so far. Mel Stride, the chairman of the Treasury Committee, who said there was “very considerable” concern that many self-employed people “fell through the gaps.” Mr Sunak agreed to meet Mr Stride to discuss potential solutions, but refused to say whether the measures could be extended. He said the UK’s support for the self-employed was better than “almost any other country.” Andy Chamberlain, the director of policy at the Association of Independent Professionals and the Self-Employed, said:

The support announced today still excludes one in three self-employed people. Limited company freelancers and the newly self-employed almost entirely missed out on support in the last lockdown and have faced bleak months of financial devastation. Now they face a dark winter ahead unless the Government does more for them.

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