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The government scheme to support self employed people with their income during the coronavirus pandemic is being extended to a second one-off and final payment of 70% of average monthly profits.
Rishi Sunak announced on Friday he would be extending the “lifeline” so self employed people can claim a second and final grant in August.
A cross-party group of 113 MPs had today urged the chancellor to extend the programme.
But he stressed that it is time to begin to “reopen the country and kickstart our economy”.
It will be less generous than the first grant, which paid out 80% of average earnings.
The second grant will be worth 70% of average monthly trading profits and will be capped at £6,570 in total.
Sunak also revealed plans to start winding down the government’s contributions to the furlough scheme which pays 80% of workers’ wages while they cannot work during to the lockdown.
From July 1, employers will be given the flexibility to bring workers back part time as long as they pay their wages for hours worked.
From August government support for the job retention scheme will then slowly be tapered away until the scheme finishes at the end of October, with employers asked to pay more in national insurance and pension contributions and a proportion of wages.
Furloughed workers will receive 80% of their pay for the duration of the scheme.
The CBI told HuffPost UK earlier this month that there are people currently on furlough whose jobs “no longer exist”, and there are fears of mass redundancies as the support is lifted from the 8.4m workers on the scheme.
It is understood that the Treasury is looking at making other forms of government support available later in the year as the economy moves into a new phase of the downturn.
Sunak said: “Our top priority has always been to support people, protect jobs and businesses through this crisis.
“The furlough and self-employment schemes have been a lifeline for millions of people and businesses.
“We stood behind Britain’s businesses and workers as we came into this crisis and we stand behind them as we come through the other side.
“Now, as we begin to re-open our country and kickstart our economy, these schemes will adjust to ensure those who are able to work can do so, while remaining amongst the most generous in the world.”
So far, 2.3m people have made claims for self employment income support, worth £6.8bn.
The job retention scheme has meanwhile helped 1m employers furlough 8.4m jobs.
From August, the level of government support will be gradually cut back for the furlough scheme.
Firstly in that month, employers will need to begin paying employer national insurance and pension contributions. For the average claim, the Treasury estimates this represents 5% of the gross cost of employing that worker had they not been furloughed.
In September, the government will only pay 70% of workers’ wages up to a cap of £2,190, with employers paying national insurance and pension contributions and 10% of wages to make up the total of 80% paid to the worker. This represents 14% of gross employment costs for the average claim.
In October, the government will only pay 60% of wages up to a cap of £2,190, while employers pay national insurance and pension contributions and 20% of wages to make up the total 80% paid to the worker. This represents 23% of the gross employment costs for the average claim.
Employers will be required to submit data on the usual hours an employee would be expected to work in a claim period and actual hours worked.
Employees who believe they are not getting their 80% share can also report any concerns to the HMRC fraud hotline.
Anneliese Dodds, Labour’s shadow chancellor, said the government’s decision to extend the help for self employed workers was welcome.
But she said it was “concerning that there is no commitment within these plans for support to only be scaled back in step with the removal of lockdown”.
“Nor is there any analysis of the impact on unemployment of a ‘one size fits all’ approach being adopted across all sectors,” she said.
“The chancellor must publish the evidence behind these decisions to provide reassurance that his proposals won’t cause an additional spike in unemployment, and an even more difficult economic recovery from this crisis.”