Chancellor Rishi Sunak ‘could underwrite £17,000 of salary’ for workers

Chancellor Rishi Sunak could underwrite around £17,000 of every worker’s salary in huge new coronavirus bailout today.

The massive rescue package is set to be unveiled by Mr Sunak and Boris Johnson after furious complaints that they were not doing enough for ordinary people.

There have been warnings that GDP could be slashed by a fifth and a million could lose their jobs within months – with many more to follow – after ‘social distancing’ measures brought the economy to a halt.  

Mr Sunak is believed to be considering options including lowing income tax payments or National Insurance.

According to the Times, officials estimate that the package would effectively underwrite 60 per cent of the average wage – which is around £28,000.

The Treasury fears there are ‘significant technical challenges’ to the new approach, and had hoped to delay announcements until next week.

However, the government has been under enormous pressure from unions and MPs from across all parties to act faster. Many companies are already imposing layoffs or cutting working hours. 

Mr Sunak said he was ‘working round the clock’ to come up with measures after holding a summit meeting with businesses and union leaders yesterday. 

They urged him to ‘pause’ a range of taxes, including National Insurance, income tax and VAT, around £35billion of which is due shortly.  

Mr Johnson said at a press conference last night that he was determined not to repeat the mistakes of the 2008 credit crunch, when the government was seen as rushing to the aid of banks but not helping ‘ordinary people’. 

‘This time we’re going to make sure that we look after the people who really suffer from the economic consequences of what we’re asking them to do, and we’ll be directing our support to them, looking after the people first,’ he said. 

In the Budget just last week, Mr Sunak unveiled a £30billion stimulus for the economy, including £12billion specifically dedicated to the fight against coronavirus.

Sick pay rules have been relaxed to make it easier for people to get money while they are off work in isolation. 

As the situation spiralled this week, with Britons urged to avoid all non-essential social contact, the Chancellor announced another £350billion package. 

That includes guaranteeing £330billion of loans to businesses, along with £20billion of grants and rates relief, and the promise of a mortgage holiday for homeowners who lose their jobs.

Mr Sunak insisted more measures would be coming, and a ban on evictions for renters has since been announced.

However, demands more much more radical action has been growing.

Earlier this week, the government’s own fiscal watchdog floated the idea of footing utility bills and cancelling council tax.

There have also been calls for the UK to emulate the Donald Trump’s proposal to hand every American $3,000 in cash, which forms part of a $1trillion (£852billion) package in the US.

Shadow chancellor John McDonnell has said the government should be paying 90 per cent of people’s wages. 

Leading trade union the GMB has called on the Government yesterday to follow the lead of other countries in guaranteeing wages during the crisis.

Sweden, Germany and Austria are already subsidising a shorter working week, with governments halving the costs with employers so that workers keep 90 per cent of their wages, the union said.

Other measures have been put in place in countries such as France, Norway and Denmark to support wages.

GMB general secretary Tim Roache said: ‘Unless the Government urgently intervenes to underwrite wages, it risks turning a public health crisis into a new personal debt crisis for hundreds of thousands of families. We need a people’s bailout.

‘Ministers must not allow workers and their families to go to the wall. Imagine being on the breadline, unable to work and being told that the light at the end of the tunnel is actually thousands more in debt to pay off. It’s just not right.

‘Huge numbers of people were covering basic living costs on credit even before this crisis struck. Suddenly finding income dry up is already pushing people to the financial brink.

‘Ministers need to guarantee wages and suspend rent and mortgage payments – not just roll them over to be paid later. This is crucial for living standards and people’s mental health now, but also for the hope of economic recovery later.

‘We are going to need people to spend in their local areas and if they’re paying off mountains of accumulated debt, they just won’t be able to do that.’

Mr Sunak’s multi-billion pound package to help firms keep workers on their payrolls comes after the Bank of England slashed interest rates to a record low.

In a dramatic move to keep the economy afloat, the Bank yesterday cut rates to an all-time low of just 0.1 per cent.

With huge numbers of firms on the brink and fears over thousands of jobs, it was the second emergency cut in just over a week.

Amid warnings that the UK is set to plunge into recession, the Bank’s new Governor Andrew Bailey said: ‘Things have happened in the past couple of weeks that none of us could have predicted.

‘The world has moved on at a frightening pace and we are responding to it. The time to act is now when we have the economic data.’

Mr Bailey also indicated that he and Mr Sunak had discussed a range of other emergency measures to help individual workers. 

Asked yesterday whether similar action could be taken in the UK to that in the US, Mr Bailey said ‘nothing is off the table’.

Last night Mr Johnson said the Chancellor was going to make an announcement today on what was being done to support firms to keep workers employed and on their payrolls.

It is not yet known if this will be a US-style plan to give money directly to households or income support for firms to enable them to keep paying their staff rather than laying them off.

Mr Sunak has already announced £330billion in loans for firms and a business rates holiday for smaller companies to prop up the economy.

But the Government has conceded it will not be enough and will today pledge further measures so people do not lose their jobs. 

Yesterday a Treasury source said: ‘The scale will match the problem so it will be big.’ 

Speaking last night, the Prime Minister urged companies to stand behind their workers and to ‘really think very carefully before you start laying off your staff’.

He said: ‘I say to business – stand by your employees, stand by your workers.’

It followed criticism from former Prime Minister Gordon Brown and Tory backbenchers that not enough was being done to reassure businesses who were letting staff go. 

Mr Brown, who led the Labour Party in government during the 2008 financial crash, said the scale of the crisis now facing the country is ‘unprecedented’ as he called for international co-operation instead of ‘populist nationalism’.

He urged the Chancellor to do ‘considerably more’ to protect jobs, telling BBC Radio 4’s Today programme: ‘He says he’ll do more but the package should be out now to avoid redundancies being forced upon companies over the next day or two.

‘I think a lot of company directors will be looking at the moment to how many staff they are going to shed in the next few days, next few weeks.

‘And I think we need to step in now with building the confidence that we can keep people in work … and have an arrangement with people where they take some holidays but at the same time they are going to have income protection.’

John Redwood, a Thatcherite Tory MP, tweeted yesterday: ‘The Government needs to head off many redundancies by offering support to businesses hit by virus closures. Keep the workforces together for an early recovery.

‘It took ten years of hard work to create many jobs and record employment. 

‘Don’t throw it away by allowing big redundancies when we hope the businesses will be needed again soon.’

Treasury minister John Glen also faced an angry backlash from Tory MPs during an urgent question in the House of Commons on employment support.

Greg Clark, the former business secretary who tabled the question, said the loan scheme announced on Tuesday was ‘not enough’ to prevent businesses laying off staff.

On the BBC’s Question Time last night, Health Secretary Matt Hancock admitted he could not live on statutory sick pay, but suggested an improvement could come with fresh measures to tackle the coronavirus crisis.

The Cabinet minister bluntly dismissed the prospect with a ‘no’ when he was asked if he could get by on the sum of £94.25 per week.

But he suggested more on the subject could come when Chancellor Rishi Sunak makes a further announcement on financial measures to tackle the economic fallout from the pandemic on Friday.

‘I’m not going to prejudge what the Chancellor’s going to say tomorrow, but all I can say is: mark my words, we will do everything we can to make sure people are supported through this,’ he said.

Mr Sunak was under increasing pressure to announce measures to support workers and renters after announcing Government-backed loans worth £330 billion to shore up companies.

The Government has already made sure sick payments are delivered to workers earlier, but the statuary sum has come under fresh scrutiny over whether it is sufficient.

There are fears workers may not self-isolate with Covid-19 symptoms to halt the spread because they do not want to take the financial blow of lost wages.

 

Yesterday the Bank of England took action to help the economy by cutting the base rate used to set the cost of mortgages and loans from 0.25 per cent, to just 0.1 per cent. 

This is the lowest interest rates have been in the Bank’s 325-year history, reflecting the gigantic scale of the crisis.

Members of the Bank’s Monetary Policy Committee took the decision unanimously after an emergency meeting yesterday.

The Bank also revealed plans to pump £200billion into the economy via quantitative easing.

It stressed the economic shock caused by Covid-19 could be ‘sharp and large, but should be temporary’.

The rate cut should drive down the cost of borrowing for millions, including businesses and households whose finances have been hammered by the pandemic.

The boss of one property firm said the decision ‘sent the simple message to businesses and households ‘We’ve got your back’.

But it was described as ‘devastating news’ for savers. The rate cut comes just over a week after it was lowered from 0.75 per cent to 0.25 per cent.

Unite union assistant general secretary Steve Turner said: ‘The Government must ensure that UK manufacturing is primed to leap out of the gate once the shutdowns are over and the virus defeated.

‘Like France’s President Macron, the UK Government needs to commit that no otherwise viable business will collapse as a result of the coronavirus pandemic.

‘It should also go without saying that, with much of the industry shutting down, workers should not be left on reduced earnings, fearful of bills or bailiffs, shivering and struggling to cope.

‘Ministers must take direction from the likes of Austria, Germany, the Netherlands and many other European countries and introduce direct, in-your-pocket wage subsidies as a priority.

‘They must also go further than offering loan guarantees by providing interest-free grants and suspending business rates, VAT, corporation tax, National Insurance and other tax payments alongside utility standing charges for the duration of any closure.

‘It is also essential that businesses be allowed to temporarily ‘mothball’ as an alternative to closure and lay-off or liquidation, with essential workers retained at work in the business and the remainder put on to gardening leave, with employment contracts and service secured.

‘Now is the time for the Government to give industry and workers the resources and breathing space they need to meet the future with confidence.’