The government will cover almost a quarter of pay for workers in “viable” jobs for the next six months, the chancellor said as he outlined plans that will take over from the furlough scheme when it finishes at the end of October.
Unveiling the support package that replaces the scrapped autumn budget in light of the new restrictions imposed to contain coronavirus, Sunak said he knew curbs on everyday freedoms were challenging and that the time had come for the public to live with some element of risk.
“It is on all of us, we must learn to live with it and live without fear,” he said.
In a move that mimics the German Kurzarbeit scheme that supplements short-time working, Sunak said workers would need to work at least a third of their normal hours to qualify.
Of the remaining two-thirds of usual pay, the employer will pay 33% and the government will pay 33%, meaning that the worker will receive 77% of their usual monthly wage in total. The government will be paying 22%.
Addressing the resurgence of the virus that had made the measures necessary, Sunak said the public should not be blamed for “striving towards normality” by seeing their friends and loved ones in recent months, a covert defence of his eat out to help out scheme.
“People were not wrong for wanting that meaning … and nor was the government wrong to want this for them,” he said. “I said in the summer that we must endure and live with the uncertainty of the moment. This means learning our new limits as we go.”
Sunak warned MPs it was “not sustainable or affordable to continue to provide this level of support that we did at the beginning of this crisis” and said that would continue to be the case.
“It can’t be that we borrow at this level forever; we must get our borrowing back under control and get our debt falling again.”
The Job Support Scheme will apply to small and medium-sized enterprises and employers will need to pick up one third of the cost to maintain workers’ pay. Larger employers will only be covered if their turnover has gone down during the Covid-19 pandemic.
All employers will be allowed to apply, even if they did not use the furlough scheme.
He said the self-employed grant support scheme will also be extended to protect those who are unable to find work over the next few months.
“These are policies we have never tried before,” Sunak said, to protect millions of jobs and businesses.
A “pay as you grow” loan scheme will allow businesses to pay back government loans over 10 years, effectively halving the total payments over the life of a loan.
A VAT holiday for the hospitality and leisure industries due to end in November will be extended to next year.
Boris Johnson’s absence from the Commons for the statement raised some eyebrows in Westminster but the prime minister told broadcasters on a trip to meet police recruits there was no difference of opinion over the proposed measures.
“Of course I fully support the package of measures that we’ve jointly drawn up,” he said, calling them “creative and imaginative proposals from the chancellor”.
Before the announcement, significant numbers of Tory MPs had put pressure on the Treasury for more support, particularly for hospitality, culture and aviation.