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Published On: Wed, Jul 8th, 2020

UK Govt Unveils Fresh £30 Billion Package to Save Jobs Market

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British Chancellor of the Exchequer Rishi Sunak leaves number 11 Downing Street, to deliver a financial announcement to the Houses of Parliament in London, Wednesday, July 8, 2020. British Treasury chief Rishi Sunak on Wednesday is set to announce a 2-billion-pound ($2.5 billion) program to create jobs for young people as the government tries to revive an economy battered by the COVID-19 pandemic. (AP Photo/Matt Dunham)

LONDON: The UK government on Wednesday unveiled a package worth £30 billion ($37 billion, 33 billion euros) to save jobs and help the young into work and kick start the British economy ravaged by the corona virus pandemic.Delivering a mini-budget to parliament, finance minister Rishi Sunak’s measures included bonuses to companies retaining staff and taking on apprentices, investment in ‘green’ jobs and allowing the whole country to enjoy discounted meals in restaurants.
“People need to know that although hardship lies ahead, no-one will be left without hope,” said finance Minister of the Exchequer Sunak. Noting that “people are anxious about losing their jobs, about unemployment rising”, Sunak said: “We’re not just going to accept this.”
But he insisted that the government’s furlough scheme already in operation to protect millions of private-sector jobs had to end in October. Other measures announced by Sunak include a temporary cut to value added tax on food, accommodation and attractions — and a higher threshold for stamp duty on home purchases to help the construction sector.
Britain has suffered Europe’s deadliest outbreak of COVID-19 and a nationwide shutdown led to the worst economic downturn among the G7 leading industrialised states. Sunak said the UK economy had contracted by 25 percent over the corona virus lock down”the same amount it grew in the previous 18 years”.
The chancellor also confirmed 3-billion pounds of green investment, after British Prime Minister Boris Johnson vowed to “build, build, build” out of the economic crisis.

The investment package includes 2 billion pounds in grants for households to insulate homes and make them more energy efficient, and 1 billion pounds for public sector buildings, including hospitals.The plan is part also of Britain’s long-term pledge to reduce carbon emissions to net zero by 2050 to tackle climate change.
Britain imposed a nationwide lock down on March 23 to halt the spread of COVID-19 but has gradually begun easing restrictions to help ailing businesses, including pubs and hair salons.
Recent official data show the UK’s biggest quarterly contraction for more than 40 years — at minus 2.2 percent — in the January-March period. However, the data included only the first full week of the lock down and Sunak suggested Wednesday that the second quarter was far worse.

Since the crisis began, the Bank of England has pumped cash stimulus worth & 300 billion pounds into Britain’s economy and slashed its main interest rate to a record-low 0.1 percent — moves aimed at propping up businesses and saving jobs.

Experts estimate the total cost of government emergency measures could also run as high as 300 billion pounds. The government’s fresh jobs retention plans unveiled Wednesday meanwhile build on its furlough scheme, under which the state is paying up to 80 percent of salaries for some nine million workers.
Sunak on Wednesday said the furlough scheme “cannot and should not go on forever”, telling MPs: “I know that when furlough ends it will be a difficult moment… But the truth is, calling for endless extensions to the furlough is just as irresponsible as it would have been, back in June, to end the scheme overnight.”We have to be honest,” he said.

The Chancellor has opted against extending the flagship Job Retention scheme beyond October, and don’t forget that the state’s contribution to wage bills will be gradually reduced until then. Clearly, removing such unprecedented government intervention in the labor market is going to bring about job losses.
But the big announcement today is that the government will pay a £1000 bonus per employee that is brought back from furlough, and kept employed until January.
On the face of it this is a fairly generous policy. In the accommodation/food sector, one of the heaviest users of the furlough scheme, that would be enough to pay around a month of earnings, based on the average of 2019 weekly pay. Anecdotally, it also seems that those staff members being furloughed were often towards the lower end of pay brackets.

Will this change the course of the jobs market? Not entirely – clearly if you are a business that has either had capacity significantly reduced by the new safety measures, or have seen demand collapse due to changing consumer habits, it’s unlikely to save jobs when the furlough scheme is unwound.

But nevertheless this scheme should at face value help cushion some of the blow for firms more widely, and it’s also worth noting that companies will get the bonus even if they’ve already brought staff back from furlough.
(Agency Inputs with Media Reports).

 

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