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Government of the United Kingdom's financial response to the COVID-19 pandemic

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Many UK businesses have been required to close during the pandemic

Following the outbreak of the COVID-19 virus reaching Great Britain and a subsequent lockdown being announced by the government; a financial package designed to help employers and businesses was announced.

Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme is a furlough scheme in the United Kingdom in response to the 2020 coronavirus pandemic. It was announced by Rishi Sunak, the Chancellor of the Exchequer, on 20 March 2020.[1] The scheme was announced on 20 March as providing grants to employers to pay 80% of a staff wage each month, up to a total of £2,500 per person per month. The scheme initially ran for three months and was backdated to the start of March.[2] Following a three-week extension of the countrywide lockdown the scheme was extended until the end of June 2020.[3][4]

Initially the scheme was only for those workers who started work at their company on or before 28 February 2020; this was later changed to 19 March 2020 (i.e. the day before the scheme was announced), making 200,000 additional workers eligible.[5] On the first day of operation 140,000 companies applied to use the scheme.[6][7]

At the end of May, the scheme was extended until the end of October but confirmed that it would end at that point. The cost has been estimated at £14 billion a month to run.[8] The decision to extend the job retention scheme was made to avoid or defer mass redundancies, company bankruptcies and potential unemployment levels not seen since the 1930s.[9] From August, National Insurance and pension contributions must be paid by employers, as well as 10% of wages from September, rising to 20% in October. From July staff can return to part time work without affecting eligibility, but companies must cover all wages for the hours worked. In addition, the scheme will close to new entrants from 30 June, and as claims are made for staff at the end of a three week period, the last date an employee can be furloughed for the first time is 10 June.[10][11][12][13] As of 27 May, 8.4 million employees had been furloughed under the scheme.[14]

Self Employed Income Support Scheme

In March the Self Employed Income Support Scheme (SEISS) was announced.[15] The scheme paid a grant worth 80% of self employed profits profits up to £2,500 each month, on companies who's trading profit was less than £50,000 in the 2018-19 financial year or an average less than £50,000 over the last three financial tax years for those who suffered a loss of income. Her Majesty's Revenue & Customs (HMRC) were tasked with contacting those who were eligible and the grant was taxable. The government also had announced a six month delay on tax payments. Self employed workers who pay themselves a salary and dividends are not covered by the scheme and instead had to apply for the job retention scheme.[16] The scheme went live on 13 May.[17] The scheme went live ahead of schedule and people were invited to claim on a specific date between 13 and 18 May based on their Unique Tax Reference number. Claimants would receive their money by 25 May or within six days of a completed claim.[18] By 15 May, more than 1 million self employed people had applied to the scheme.[19] At the end of May a second grant of up to £6,570 that would be paid in August was announced.[20]

Business grants

The government announced Retail, Hospitality and Leisure Grant Fund (RHLGF) and changes to the Small Business Grant Fund (SBGF) on 17 March. The SBGF was changed from £3,000 to £10,000, while the RHLGF offered grants of up to £25,000.[21][22][23] £12.33 billion in funding was committed to the SBGF and the RHLGF schemes with another £617 million added at the start of May.[24] RHLGF and SBGF only applied to business in England.[25] The government pledge £3.5 billion in funding for Northern Ireland, Scotland and Wales to support to businesses.[21]

Coronavirus Business Interruption Loan Scheme and Coronavirus Large Business Interruption Loan Scheme

On 23 March the Government announced the Coronavirus Business Interruption Loan Scheme (CBILS) for small and medium-sized businesses and Covid Corporate Financing Facility for large companies.[26] The government banned banks from seeking personal guarantees on Coronavirus Business Interruption loans under £250,000 following complaints.[27][28] Coronavirus Large Business Interruption Loan Scheme (CLBILS) was announced on 3April and later tweaked to include more companies.[28][29] In May the amount a company could borrow on the scheme was raised from £50 million to £200 million. Restrictions were put in place on companies on the scheme including dividends payout and bonuses to members of the board.[30] On 20 April the Government announced a scheme worth £1.25 billion to support innovative new companies that could not claim for coronavirus rescue schemes.[31]

Bounce Back Loan Scheme

The government additionally announced the Bounce Back Loan Scheme (BBLS) for small and medium size businesses on 27 April. The scheme offered loans of up to £50,000 and was interest free for the first year before an interest rate of 2.5% a year was applied, with the loan being paid back within six years. Businesses who had an existing CBILS loan of up to £50,000 could transfer on to this scheme, but had to do so by 4 November 2020. The scheme launched on 4 May.[32][33] The loan was 100% guaranteed by the government and was designed to be simpler than the CBILS scheme.[34][35] More than 130,000 BBLS applications were received by banks on the first day of operation with more than 69,500 being approved.[36][34] On 12 May almost £15 billion of state aid had been given to businesses.[37]

Government contracts

The Guardian reported that after the government had suspended the standard tender process so contracts could to be issued "with extreme urgency", over a billion pounds of state contracts had been awarded under the new fast-track rules. The contracts were to provide food parcels, personal protective equipment (PPE) and assist in operations. The largest contract was handed to Edenred by the Department for Education, it was worth £234 million and was for the replacement of free school meals.[38] Randox Laboratories who have Owen Paterson as a paid consultant were given a £130 million contract to produce testing kits.[39] In addition 16 contracts totalling around £20 million were agreed to provide HIV and malaria drugs, which were thought might be a cure to COVID-19.[40]

Other schemes

The UK government announced a £750 million package of support for charities across the UK. £370 million of the money was set aside to support small, local charities working with vulnerable people. £60 million of £370 was allocated to charities in Scotland, Wales and Northern Ireland in the following breakdown

  • £30 million for Scotland
  • £20 million for Wales
  • £10 million for Northern Ireland.[41][42]

On 13 May the Government announced that it was underwriting trade credit insurance, to prevent businesses struggling in the pandemic from having no insurance cover.[43][44]

Reaction and criticism

Sunak was asked to rapidly act to help by the Shadow Chancellor, John McDonnell. The acting leader of the Liberal Democrats, Ed Davey, said that people were being unfairly "hung out to dry", with "their dream jobs turning into nightmares" after hundreds of MPs contacted the Chancellor.[45]

The Institute for Employment Studies estimated that 100,000 people could not be eligible for any type of government help as they started a new job to too late to be included on the job retention scheme. While UKHospitality informed the Treasury Select Committee that between 350,000 and 500,000 workers in its sector were not eligible.[46][47]

Following changes to the scheme at the end of May, the director of the Northern Ireland Retail Consortium said that being asked to pay wages when businesses had not been trading was an added pressure. While the Federation of Small Businesses were surprised that the Chancellor had announced a tapering of the scheme when ending it.[48] Northern Ireland's economy minister Diane Dodds said that changes to the scheme could be very difficult for some sectors uncertain about when they can reopen, particularly in the hospitality and retail sector, whilst finance minister Conor Murphy said that it was too early in the economic recovery.[49]

In 2002,[dubious ] UK Chancellor Rishi Sunak promised to do “whatever it takes” to protect business from Covid19 damage, laying out a mix of tax breaks, employee subsidies (‘furloughing’) as well as grants and loans to business that will cost more than £100 billion. TaxWatch UK[50] has analysed the Bank of England's list of 53 beneficiaries of business loans, and found that thirteen companies – receiving 29% of the money – have links to offshore tax havens (including Chanel in the Cayman Islands or Wizz Air in Jersey), or sweetheart locations like the Netherlands (where construction equipment manufacturer JCB is registered). JCB paid family shareholders a dividend of £75 million in 2018.[51][full citation needed] The BBC reported that Tottenham Hotspur football club secured a low-interest loan of £175 million, despite being owned by billionaire tax exile Joe Lewis.[52] Wizz Air took government money whilst granting generous share options to senior managers, worth £1.5 million to chief executive József Váradi and £850,000 to chief operating officer Diederick Pen.[53][full citation needed] The Times reported that two of the biggest beneficiaries of Covid emergency funding paid no UK tax at all.[54][full citation needed] CNH Industrial, which owns the Iveco lorry firm, borrowed £600 million; the giant German chemicals group BASF claimed £1 billion. Both companies claimed credits from the taxpayer in recent years, rather than paying in. Another claimant, Baker Hughes, is a subsidiary of General Electric which is contesting an HMRC claim of £1 billion tax fraud. “The disclosures have raised questions over why overseas corporations and wealthy individuals have been given what is effectively state aid”.[who said this?][55][full citation needed]

References

  1. ^ "Coronavirus: Government to pay up to 80% of workers' wages". BBC News. 20 March 2020. Retrieved 20 March 2020.
  2. ^ Partington, Richard (20 March 2020). "UK government to pay 80% of wages for those not working in coronavirus crisis". The Guardian. Retrieved 20 April 2020.
  3. ^ "Government extends furlough scheme to pay staff". BBC News. 17 April 2020.
  4. ^ Elliott, Larry (17 April 2020). "UK government extends furlough scheme until end of June". The Guardian. Retrieved 20 April 2020.
  5. ^ Osborne, Hilary (18 April 2020). "'We're heartbroken': new starters trapped by furlough loophole". The Guardian. Retrieved 20 April 2020.
  6. ^ Osborne, Hilary; Kollewe, Julia (20 April 2020). "140,000 UK companies apply for coronavirus job furlough scheme". The Guardian. Retrieved 20 April 2020.
  7. ^ Regan, Alex (5 April 2020). "Coronavirus: 'I missed out on furlough payments by a day'". BBC News. Retrieved 5 April 2020.
  8. ^ Partington, Richard (12 May 2020). "UK furlough scheme extended until end of October". The Guardian.
  9. ^ Helm, Toby; Inman, Phillip (2 May 2020). "Business leaders: Extend furlough to avoid millions of job losses". The Guardian.
  10. ^ Read, Simon (29 May 2020). "Furlough scheme to finish at end of October". BBC News.
  11. ^ "Chancellor extends Self-Employment Support Scheme and confirms furlough next steps". 29 May 2020.
  12. ^ https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/888764/Factsheet_for_SEISS_and_CJRS_schemes.pdf
  13. ^ Stewart, Heather; Partington, Richard; Perraudin, Frances (29 May 2020). "Rishi Sunak confirms furlough scheme to be gradually withdrawn". The Guardian.
  14. ^ "UK furlough scheme now covers 8.4 million workers". BBC News. 27 May 2020.
  15. ^ Sillars, James. "Coronavirus: 110,000 claims for self-employed aid scheme on opening". Sky News.
  16. ^ Peachey, Kevin (26 March 2020). "Coronavirus: What help will self-employed get from government?". BBC News.
  17. ^ Pratt, Kevin. "Income Support Scheme For UK Self-Employed Goes Live". Forbes.
  18. ^ "Applications for Self-Employment Income Support Scheme open early". HM Treasury. 13 May 2020.
  19. ^ "Coronavirus: Self-employed grant claims top one million". BBC News. 15 May 2020.
  20. ^ Peachey, Kevin (29 May 2020). "Virus-hit self-employed to receive second payment". BBC News.
  21. ^ a b "Chancellor announces additional support to protect businesses". HM Treasury. 17 March 2020.
  22. ^ "Coronavirus (COVID-19): business support grant funding - guidance for businesses". GOV.UK. Retrieved 19 May 2020.
  23. ^ "Coronavirus: Chancellor unveils £330bn lifeline for economy". BBC News. 17 March 2020. Archived from the original on 17 March 2020. Retrieved 17 March 2020.
  24. ^ "Top-up to local business grant funds scheme". 2 May 2020.
  25. ^ "Financial support for businesses during coronavirus (COVID-19)" (PDF).
  26. ^ "Coronavirus - Business support to launch from today". GOV.UK.
  27. ^ Verity, Andy (30 March 2020). "Banks under fire for coronavirus loan tactics". BBC News.
  28. ^ a b "Chancellor strengthens support on offer for business as first government-backed loans reach firms in need". GOV.UK.
  29. ^ "Treasury backs loans to bigger businesses". BBC News. 16 April 2020.
  30. ^ Inman, Phillip (19 May 2020). "Maximum coronavirus loans for large firms increased to £200m". The Guardian.
  31. ^ Jack, Simon (20 April 2020). "Coronavirus: Government unveils £1.3bn scheme to help start-ups". BBC News. Retrieved 20 April 2020.
  32. ^ "Small businesses boosted by bounce back loans".
  33. ^ "Apply for a coronavirus Bounce Back Loan". GOV.UK.
  34. ^ a b Hotten, Russell; Mustoe, Howard (4 May 2020). "UK banks get 100,000 loan applications on first day". BBC News.
  35. ^ https://www.gov.uk/government/news/new-bounce-back-loans-to-launch-today
  36. ^ "Over 69,000 loans approved in the first day of the Bounce Back Loan Scheme".
  37. ^ Partington, Richard (12 May 2020). "State-backed loan schemes deliver £15bn to UK businesses". The Guardian.
  38. ^ Evans, Rob; Garside, Juliette; Smith, Joseph; Duncan, Pamela (15 May 2020). "Firms given £1bn of state contracts without tender in Covid-19 crisis". The Guardian.
  39. ^ Neate, Rupert; Garside, Juliette; Lawrence, Felicity; Evans, Rob (11 May 2020). "Healthcare firm advised by Owen Paterson won £133m coronavirus testing contract unopposed". The Guardian.
  40. ^ O'Carroll, Lisa (14 May 2020). "UK spent £20m buying up stocks of HIV and malaria drugs". The Guardian.
  41. ^ "Funding to support the charity sector announced". The Charity Commission for Northern Ireland. 9 April 2020.
  42. ^ "Chancellor's statement on coronavirus (COVID-19)". HM Treasury. 8 April 2020.
  43. ^ "Government to support businesses through Trade Credit Insurance guarantee". HM Treasury. 13 May 2020.
  44. ^ Ralph, Oliver (13 May 2020). "UK government steps in to back trade credit insurance". Financial Times.
  45. ^ McCulloch, Adam (3 April 2020). "Treasury urged to look again at coronavirus scheme loophole". Personnel Today. DVV Media Group. Retrieved 5 April 2020.
  46. ^ Wilson, Tony (27 April 2020). "'Falling through cracks' or 'left in limbo' – fixing the holes in our safety net". Institute for Employment Studies.
  47. ^ Homer, Alex (15 May 2020). "Furlough boost 'makes no difference' to thousands". BBC News.
  48. ^ "Furlough pay ask 'another pressure on retailers'". BBC News. 29 May 2020.
  49. ^ "Furlough changes could be 'difficult' for NI firms". BBC News. 29 May 2020.
  50. ^ Dunnagan, Alex (9 May 2020). "Tax havens, tax avoidance, and government support for businesses during the coronavirus pandemic". Taxwatch UK.
  51. ^ Times June 5 2020
  52. ^ "Tottenham seal £175m Bank of England loan to support during coronavirus". BBC Sport. 4 June 2020.
  53. ^ Times 11 June 2020
  54. ^ Times 6 June 2020
  55. ^ Times 5 June 2020

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