The UK has taken unprecedented actions to support households and businesses. It will be interesting to see what the Australian Government comes out with when they announce theirs. The UK is providing wages support, rental support, and more support for the small business sector.
Capital Economics said that it expected the unemployment rate to rise from just under 4% to about 6% due to the crisis. However, without this latest government intervention, that rate would have risen to the financial crisis level of 8%.
The UK Government has announced a new Coronavirus Job Retention Scheme. Any employer in the country – small or large, charitable or non-profit – will be eligible for the scheme. But it does not cover those on zero hours contracts, or are self employed.
Government grants will cover 80% of the salary of retained workers up to a total of £2,500 a month – that’s above the median income. Employers can top up salaries further if they choose to.
Employers will be able to contact HMRC for a grant to cover most of the wages of people who are not working but are furloughed and kept on payroll, rather than being laid off.
The Treasurer said “that means workers in any part of the UK can retain their job, even if their employer cannot afford to pay them, and be paid at least 80% of their salary”.
The Coronavirus Job Retention Scheme will cover the cost of wages backdated to March 1st and will be open initially for at least three months – and I will extend the scheme for longer if necessary.
There is no limit on the amount of funding available for the scheme.
In addition he announced that the Coronavirus Business Interruption Loan Scheme will now be interest free for twelve months, not 6 months.
And a further cash flow support through the tax system for businesses was announced, buy deferring the next quarter of VAT payments.
That is a direct injection of £30bn of cash to employers, equivalent to 1.5% of GDP.
They will be launching in the coming days a major national advertising campaign to communicate the available support for businesses and people.
To strengthen the safety net, the Universal Credit standard allowance, for the next 12 months, will be lifted by £1,000 a year, as well as increasing the Working Tax Credit basic element by the same amount
Together these measures will benefit over 4 million of our most vulnerable households.
As a result, every self-employed person can now access, in full, Universal Credit at a rate equivalent to Statutory Sick Pay for employees.
Taken this amounts to nearly £7bn of extra support through the welfare system to strengthen the safety net and protect people’s incomes.
UK homeowners can get a three-month mortgage holiday if they need it.
They also announced nearly £1bn of support for renters, by increasing the generosity of housing benefit and Universal Credit, so that the Local Housing Allowance will cover at least 30% of market rents.
They called these actions “an unprecedented economic intervention to support the jobs and incomes of the British people”.
Further measures will be announced next week, to ensure that larger and medium sized companies can also access the credit they need.
He said “we want to look back on this time and remember how, in the face of a generation-defining moment, we undertook a collective national effort – and we stood together”.
