LONDON — The British government introduced a new bonus scheme on Wednesday that it hopes will limit the anticipated spike in unemployment as a result of the pandemic and announced a series of support measures for hard-pressed firms in the tourism and hospitality sectors.
Treasury chief Rishi Sunak said his latest major intervention is aimed at weaning the U.K. economy off emergency measures announced when the country was put into lockdown in March, while at the same time protecting and generating as many jobs as possible during the recession.
"People need to know that although hardship lies ahead, no-one will be left without hope," he told socially distanced lawmakers.
In his statement, Sunak outlined incentives for businesses to retain and hire staff, funding for training and environmental projects, some tax cuts, particularly for those in tourism and hospitality, and a new "Eat Out to Help Out" discount scheme.
So far, Britain has been spared the sharp rises in unemployment seen in the U.S. for example, because of the Job Retention Scheme, whereby the government has been paying up to 80% of the salaries of workers retained rather than dismissed, up to 2,500 pounds ($3,125) a month. Some 1.1 million employers have taken advantage of the scheme to furlough 9.4 million people at a cost to the government of 27.4 billion pounds.
While confirming that the scheme will end in October, Sunak said the government is introducing a new one that could cost up to 9.4 billion pounds if everyone who has been furloughed is given his or her job back. Under this scheme, the government will pay companies a 1,000-pound bonus for each employee they take back.
"Leaving the furlough scheme open forever gives people false hope that it will always be possible to return to the jobs they had before," he said.
"The longer people are on furlough, the more likely it is their skills could fade, and they will find it harder to get new opportunities," he added.
The government is hoping that many employers will make use of the new scheme to keep a lid on unemployment as firms struggle during a historically savage recession — in March and April alone, the U.K. economy shrank 25%. Many economists think unemployment could more than double to more than 3 million later this year, to levels last seen in the 1980s.
Sunak reserved extra support for the tourism and hospitality sectors, which were shut down during the lockdown. Pubs and restaurants, for example, only reopened Saturday for the first time in over three months.
Sunak said firms within those sectors will see taxes on sales of food and drinks as well as on accommodation and admission to attractions slashed to 5% from 20%. This measure, Sunak said, is worth 4 billion pounds ($5 billion) and should help companies support 2.4 million jobs.
He also announced an "Eat Out to Help Out" scheme for the month of August that will give people a 50% discount at participating restaurants, cafes and pubs between Monday and Wednesday up to a maximum 10 pounds per person.
UK Hospitality, which represents the sector, said the measures will provide many firms "much-needed help to get going again in earnest."
Other measures announced included 2 billion pounds to fund work placement schemes for 16-to-24-year-olds, a 3 billion-pound environmental package as well as the temporary elimination of a tax on house purchases below 500,000 pounds.
Make UK, which represents companies in the manufacturing sector, praised Sunak's "bold intent" and singled out the training measures for the young.
"This is not the beginning of the end of this crisis, however, but perhaps the end of the beginning as far as the economy is concerned," Chief Executive Stephen Phipson said.
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