Sunak’s ‘Whatever It Takes’ Virus Support Unprecedented in U.K.
Sunak’s ‘Whatever It Takes’ Virus Support Unprecedented in U.K.
(Bloomberg) -- U.K. Chancellor of the Exchequer Rishi Sunak said he can’t save every job and every business but has vowed to do “whatever it takes” to help companies and workers cope with the economic fallout from the coronavirus pandemic. The result is a support package unprecedented in peacetime Britain.
Here’s a rundown of the measures, and their take-up so far:
Extra Funding:
Sunak said Tuesday the government has spent an extra 14.5 billion pounds ($18.1 billion) on public services in recent weeks.
- National Health Service: Delivering his budget on March 11, Sunak said “whatever extra resources our NHS needs to cope with COVID-19, it will get.” He announced a 5 billion-pound emergency response fund available to the NHS and other public services.
- Welfare: Claimants of contributory employment and support allowance benefits can claim from day one rather than day eight of being unemployed. The government removed the minimum income floor on Universal Credit -- including for the self-employed -- and increased the standard allowance by 1,000 pounds per year. The Working Tax Credit basic element was also raised by 1,000 pounds per year. The measures are worth about 7.5 billion pounds.
- Sick Pay: Statutory sick pay will be paid from day one, not day four, and extended to people advised to self-isolate regardless of whether they have Covid-19 symptoms. For as many as 2 million companies employing 250 people or fewer, the government will cover payments up to 14 days -- a commitment of as much as 2 billion pounds.
- Hardship Grants: 500 million pounds to be distributed by local authorities to directly support vulnerable people in their areas.
Results so far: As of April 14, there were 1.4 million new claims for Universal Credit since March 16. The benefit is paid to people without work or on low incomes, and in normal times there are around 55,000 applications a week.
Business Grants
- Cash grants of 10,000 pounds to the country’s smallest businesses -- those that don’t pay business rates. That benefits 700,000 small businesses and is worth 2 billion pounds.
- Retail, hospitality and leisure sector businesses with a so-called ratable value of less than 51,000 pounds are eligible for grants of 25,000 pounds. Combined with the business rates holidays detailed below, the measures total more than 20 billion pounds.
Results so far: Almost 100,000 firms have drawn out over 1 billion pounds in grants, the Local Government Association said on April 13.
Tax Breaks
- Business Rates: All hospitality, retail and leisure firms have a one-year business rates holiday. Combined with the grants detailed above, the measures total more than 20 billion pounds.
- VAT Holiday: No business will have to pay value-added tax in the April-June quarter, with payments deferred until the end of the financial year. Sunak said that amounts to a cash injection of 30 billion pounds.
- Income Tax: The self-employed are able to defer their payments to January.
Loan Guarantees:
On March 17, Sunak announced 330 billion pounds of loan guarantees -- equivalent to 15% of GDP. This was made up of:
- Covid Corporate Financing Facility: A Bank of England-administered program that allows large companies with investment-grade credit ratings to issue short-term debt in the form of commercial paper lasting as long as a year, to help them cover immediate cash needs.
- Coronavirus Business Interruption Loan Scheme: The program was first announced on March 11 and later extended in scope, allowing small companies to access loans of as much as 5 million pounds, with no interest to be paid for the first 12 months. To encourage commercial banks to lend the money, the government guaranteed to incur the first 80% of any losses on the loans, which first became available on March 23. Sunak said this week he’s looking at whether to guarantee 100% of the loans as other countries have done, but noted that would mean handing extra risk to the taxpayer.
- Coronavirus Large Business Interruption Loan Scheme: Sunak announced a program on April 4 for companies with an annual turnover of between 45 million pounds to 500 million pounds to access loans of up to 25 million pounds.
Results so far: As of April 8, the Bank of England had purchased a net 5.5 billion pounds of commercial paper under the CCFF program. Under CBILS, 6,016 loans worth 1.1 billion had been approved by April 15, out of 28,640 formal applications, according to U.K. Finance, the industry group for banking and finance.
Paying Wages:
- Coronavirus Job Retention Scheme: Any employer regardless of size or profitability can furlough its workers, and the government will pay 80% of their wages up to a total of 2,500 pounds a month -- so long as the employee remains linked to the job and doesn’t work during the furlough period. Employers are allowed to top up employee salaries. The program was backdated until March 1. It originally included only employees on payroll the previous month, but following an outcry from people starting new jobs, the Treasury on Wednesday extended it to all those starting new jobs by March 19. The program is due to open for applications on April 20, making its first payments by the end of the month. The Office of Budget Responsibility estimates the measure will cost 42 billion pounds if the nationwide lockdown lasts for three months.
- Self-Employed Workers Scheme: On March 26, Sunak said the government would pay the self-employed a taxable cash grant worth 80% of their average monthly profits, up to a maximum of 2,500 pounds, for at least three months. The program will be open for anyone with an annual income of up to 50,000 pounds, and is due to be up and running by early June. It will cost 10 billion pounds over a three-month lockdown, according to the OBR.
Housing:
- Mortgage Holiday: Sunak came to an agreement with lenders to grant homeowners in difficulty a three-month mortgage holiday.
- For renters, Sunak increased housing benefit and Universal Credit to cover at least 30% of market rates -- a measure he valued at almost 1 billion pounds.
Results so far: Some 1.2 million customers had been granted mortgage holidays, according to an April 14 statement from UK Finance. That’s one in nine of all mortgages, with the average monthly interest payment deferred per customer estimated at 260 pounds.
Sectoral Deals
- Trains: The Department for Transport said on March 23 it will take on the revenue and cost risk for the nation’s rail services for six months, with operators continuing to manage day-to-day services for a “a small, predetermined management fee.”
- Buses: On April 3, the government announced a 400-million pound package to keep bus services running nationwide, including 167 million pounds of new money.
- Charities: Sunak on April 8 announced a 750 million-pound package to help charities and hospices weather the crisis.
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