The Chancellor announced his new scheme yesterday which will replace the furlough initiative, set to end at the end of October. By November, Mr Sunak’s new scheme will come into force and run for six months, he announced. Under the scheme, the Government will subsidise the pay of employees who are working fewer than normal hours due to lower demand, applying to staff who can work at least a third of their usual hours. While employers will pay staff for the hours they do work, the Government and the employer will pay a third each of the hours not worked.
This means the Government now covers just 22 percent of employee wages up to the cap of £697.92.
Richard Murphy of Tax Research UK tells Express.co.uk that “economic meltdown” could ensue as the new measures will lead to an increase in unemployment.
He said: “On 77 percent of income, there are going to be many households who can’t pay the bills, the rent or the mortgage.
“This has repercussions for all these sectors, and then the banking sector – we are approaching an unavoidable financial crisis, meltdown time.
“This scheme is going to backfire on Mr Sunak. Now employers know the Government is going to increase their costs and they are going to lay-off staff.”
While announcing the scheme, Mr Sunak said he hoped the plan would “benefit large numbers” but he could not say what job is “viable or not”.
Speaking at a press conference after the scheme was unveiled, he said: “It’s not for me to sit here and make pronouncements upon exactly what job is viable or not but what we do need to do is evolve our support now that we’re through the acute phase of the crisis.
“We obviously can’t sustain the same level of things that we were doing at the beginning of this crisis.”
But Mr Murphy made a grim prediction after hearing the announcement yesterday – that millions more will be unemployed by Christmas, and matters will worsen next year.
READ MORE: Rishi Sunak warned ‘Millions more unemployed by Xmas’
“So, we are going to see businesses failing – hundreds of thousands of businesses failing.
“The Small and Medium Enterprise sector (SME) employs 16 million people – that’s more than half of people employed in the UK.
“The SME sector will be hit hardest, so if they suffer so many people will be out of work it is absurd.”