Sunak announces new scheme to subsidise wages

Chancellor Rishi Sunak has announced a new Job Support Scheme to help stave off mass unemployment amid the ongoing coronavirus crisis. The scheme, which will run for six months, will subsidise the pay of employees who are working fewer than their normal hours due to lower demand. Employers will pay for the hours actually worked and one third of the wages lost. The Government will pay for another third of the lost pay while the employee will forego the final third. Only staff who can work at least a third of their normal hours will be eligible for the scheme. Large companies applying for the scheme will need to show that their turnover has been affected by the pandemic. Paul Johnson, director of the Institute for Fiscal Studies, said the Chancellor was “trying to plot a difficult path between supporting viable jobs while not keeping people in jobs that will not be there once we emerge from the crisis”. Mr Sunak’s new wage subsidy scheme will slash state support from 60% per job at the end of October, when the furlough scheme ends, to a maximum of 22%. Separately, the Government announced fresh support for self-employed workers but only at 20% of average monthly trading profits, down from 70% before. Mr Sunak’s move was praised by the Trades Union Congress, the Confederation of British Industry and the British Chambers of Commerce, which said the plan was a “shot in the arm” for businesses. However, Mike Cherry, chairman of the Federation of Small Businesses, said: “The Chancellor had nothing to say for those left out of the first round of support measures – not least the newly self-employed and company directors.”

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Assessment and VAT extensions granted

As part of the Chancellor’s winter economic plan, self-assessed income taxpayers can extend their outstanding tax bill over 12 months from January. Rishi Sunak also announced that restaurants, hotels and cinemas would continue to pay VAT at 5% rather than the usual 20% until March 31 next year. The Chancellor suggested after his Commons statement that there would have to be tax rises in the long term to help balance the books. He said: “We need to have an eye on our public finances and make sure we stay in a strong and sustainable position. I will have to make some of the difficult decisions in the future as we get back on a path to sustainability.” He went on to say that a smaller state would be ideal following the crisis: “The state being as nimble and agile as possible means it doesn’t have to raise as much tax revenue from people and people can keep more of the money they own. That is in general a good thing. As we g et through this we can get back to a normal situation.”

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Brussels ready to clamp down on sweetheart corporate tax deals

Paolo Gentiloni, the EU’s economics commissioner, has said that Brussels wants to pressure capitals to root out “structures that facilitate aggressive tax planning” in order to level-up the single market’s playing field.

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Government to launch ‘Pay As You Grow’ loan payback scheme

The Government is to launch a ‘Pay As You Grow’ loan payback scheme to provide flexibility for businesses who took out loans amid the coronavirus crisis. Speaking in the Commons on Thursday, Chancellor Rishi Sunak said the repayment time will be extended from six years to a decade, nearly halving the average monthly repayment. He added that businesses can now choose interest only loans and that those who take on the initiative will not see their credit rating affected. The Government is also starting work on a successor loan plan to begin in January. The application deadline for coronavirus loan schemes has been extended to November. Charlotte Crosswell, chief executive of Innovate Finance, which represents fintech and non-bank lenders, said she was “encouraged” by plans for a “long-term solution for SME financing.” Elsewhere, Miles Celic, chief executive of TheCityUK, said the loan extensions would help “to preserve many viable firms, allowing them the chance to return to growth after the pandemic has passed”.

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Half-year losses triple at UK peer-to-peer lender Funding Circle

Losses at P2P lender Funding Circle almost tripled in the first half of the year to £115m, driven by coronavirus-related write downs. Some investors are set for their first losses.

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EU seeks to limit reliance on City post-Brexit

The European Commission has warned that the EU will have problems setting rules and regulations in the financial sector unless it weans itself of its dependence on the City of London for access to capital. The development of a capital markets union has become more urgent because of Brexit, Valdis Dombrovskis, an executive vice-president of the European Commission said on Thursday. In a communication to EU governments, the European Commission said: “An enhanced single rulebook and effective supervision will be crucial to prevent regulatory arbitrage, forum shopping, and a race to the supervisory bottom.” Emma Reynolds of lobby group TheCityUK said: “The UK’s capital markets have been – and will continue to be – essential for firms across the EU seeking to raise capital to fund growth and create jobs. Britain’s financial services industry has some of the highest standards in the world and is clear about maintaining that position.”

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The next financial crisis may be coming soon

The FT’s Gillian Tett says heightened concerns over an impending financial crisis is hurting business confidence, and a rise in defaults as the coronavirus crisis moves into its insolvency stage could tighten credit conditions.

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Retailers facing £8bn hit as rates holiday ends

Retailers have warned they face an £8bn hit when business rates relief comes to an end. A 12-month pause on shops’ business rates was brought in when coronavirus struck, giving firms vital breathing space after they were forced to close their doors and reopen to far lower footfall than normal. However, Rishi Sunak has not extended the relief and from April companies will have to once again start paying rates based on the rental value of properties last assessed five years ago – many of which will be disproportionately high due to a plunge in the value of high street real estate as shoppers head online instead. The Government has already said that the next revaluation will take place in 2023, meaning firms could be stuck with massive bills for years.

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Pension contributions left out of job support scheme

The Treasury has confirmed that its new Job Support Scheme will not cover employer pension contributions, which has raised concerns about how employers will comply with auto-enrolment obligations. FT Adviser understands that under the new scheme, unveiled by Rishi Sunak yesterday, the Government will not cover pension contributions or class one employer NI contributions, which will remain payable by the employer.

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COVID-19 is disrupting pensions

Debora Price, professor of social gerontology at the University of Manchester, has warned that COVID-19 has set pensions equality back by a decade. She claimed that any previous improvements to bridge the gender gap in pension provision have now been ruined as a result of the coronavirus pandemic.

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Redcentric chiefs charged with fraud

Redcentric’s former boss Fraser Fisher has been charged with two counts of making a false or misleading statement by the Financial Conduct Authority. Timothy Coleman and Estelle Croft, formerly CFO and FD respectively, face the same charges and further counts relating to the firm’s 2015 accounting scandal. The company’s auditor, PwC, has already been fined £4.6m for its work.

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PwC not so confident in Cineworld

Cineworld has revealed a $1.6bn loss of the first six months of the year amid the ongoing coronavirus. PwC is unable to appropriately present the firm as a going concern.

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Impersonation frauds soar during pandemic

More than 15,000 impersonation scams were reported in the first half of 2020, according to a new report by trade body UK Finance, an 84% increase on the year prior. Criminals exploiting the increased use of technology among the public during the COVID-19 pandemic stole around £208m from fake government loan forms, phishing emails and bogus websites. Scams listed by HMRC included fake tax rebate links and text messages issuing fake £250 fines for breaking quarantine rules.

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Hawkish Sunak says we must learn to live with virus “without fear”

Rishi Sunak urged the nation to live with coronavirus “without fear” yesterday when he launched his winter economy plan. The Chancellor said Britain can no longer put normal life on hold, adding that the country could not carry on ignoring the economic impact of the pandemic. Pointing out that “the price our country is paying is wider” than the coronavirus death toll, he added: “As we think about the next few weeks and months, we need to bear all those costs in mind.” The Telegraph’s Camilla Tominey says this has been interpreted as a message to Boris Johnson and the Health Secretary, with one senior parliamentarian saying: “The message was clear – we cannot gamble any further with the economy.” The Chancellor admitted the economy was now “likely to undergo a more permanent adjustment”, with some jobs disappearing for good. Mr Sunak suggested his wage subsidy scheme could cost £300m a month, compared with £6bn a month for the furlough scheme.

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Hauliers hit back at Gove as customs row heats up

Haulage groups have criticised the Government for putting responsibility for avoiding queues of lorries heading to Dover onto them while its new customs IT systems remain incomplete. The Road Haulage Association and Logistics UK both said it was Michael Gove’s responsibility to give firms the “details of and access to” the promised new IT systems. Simon Sutcliffe a partner at Blick Rothenberg, said: “It’s all very well for Mr Gove to say that unless the hauliers get their paperwork in order there will be huge delays and confusion at UK ports, but the Government have still not put the electronic systems that they promised in place.” A HMRC spokesperson said: “The development of border systems necessary for the end of the transition period is on track.”

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