On Friday 29 May the Chancellor, Rishi Sunak, presented further details of how several key schemes will develop over the coming weeks and months.
Coronavirus Job Retention Scheme (CJRS)
In an announcement on 29 May the Chancellor provided more details of the extension of the CJRS to the end of October. After some apparently managed leaking to the media, the tightening of the rules was not as harsh as expected. The key points are:
Closure dates
Payments to employees under the CJRS will continue until the end of 31 October 2020 at the 80% earnings level, subject to a £2,500 a month maximum. However, the scheme will close to new entrants from 30 June. From then on, employers will only be able to furlough employees that they have already furloughed for a full three-week period before 30 June.
A consequence of this end of June deadline is that the final date by which an employer can furlough an employee for the first time will be 10 June, in order for the current three week furlough period to be completed by 30 June.
Employers will have until 31 July to make any claims in respect of the period to 30 June. From a practical point of view, employers will need to consider quickly whether any existing employees who have not been furloughed, possibly currently working part time, should now be furloughed ahead of the new flexible furlough rules (see below) starting on 1 July.
Flexible furlough
Currently a furloughed employee cannot do any work for their employer or associated organisation. From 1 July, a month earlier than previously announced, this absolute requirement will be relaxed to allow employers to bring back furloughed employees on a part time basis. The furlough scheme will then cover only the hours for which the employee is not working, with the employer meeting full payment for the hours worked.
Further guidance on the operation of the flexible option, and how employer claims should be calculated, will be published on 12 June. In the interim a factsheet with basic information has been issued.
Employer costs
The government involvement in meeting furlough costs is to be phased down on the following timeline:
- For June and July the government will continue to meet the full cost of 80% earnings (maximum £2,500) plus associated employer National Insurance (NI) and employer automatic enrolment pension contributions.
- In August the government will meet the cost of 80% earnings (maximum £2,500), but the employer will be responsible for NI and pension contributions. Based on the current average monthly equivalent CJRS wage claim of £1,368, the government calculates the switch will cost employers £69 per month per employee.
- In September the government will meet the cost of 70% earnings (maximum £2,187.50), with the employer responsible for covering the other 10% of earnings (maximum £312.50) as well as NI and pension contributions. Based on the same average monthly equivalent CJRS wage, the government calculates this will cost employers £207 per month, per employee.
- In October the government will meet the cost of 60% earnings (maximum £1,875), with the employer responsible for covering the other 20% of earnings (maximum £625) as well as NI and pension contributions. Based on the same average monthly equivalent CJRS wage, the government calculates this will cost employers £345 per month, per employee.
- In November, the scheme ends.
Consideration will need to be given now on whether to begin the 45-day redundancy consultation process ahead of the CJRS starting to move onto employers from 1 August.
Summary timeline of CJRS changes
| July | August | September | October | |
| Government wage contribution | 80% up to £2,500 | 80% up to £2,500 | 70% up to £2,187.50 | 60% up to £1,875 |
| Employer wage contribution | – | – | 10% up to £312.50 | 20% up to £625 |
| Employer’s NI and pension contributions | Government pays | Employer pays | Employer pays | Employer pays |
The latest figures (to 24 May) show why the government is seeking to wind down the CJRS and has emphasised 31 October is the end date:
- 1 million employers have made claims;
- 8.4 million employees have been furloughed; and
- Total claims made so far amount to £15 billion.
The Office for Budget Responsibility’s latest projections put the current gross cost of the scheme at £14 billion a month, although once income tax and NICs are considered, the net cost is £10 -£11 billion. The Institute for Fiscal Studies thinks the CJRS and its self-employed counterpart could end up costing £100 billion in total.
Self-employed Income Support Scheme (SEISS)
The Chancellor also announced changes to the SEISS on 29 May, to some degree mirroring the amendments to the CJRS:
Closure date
The SEISS will now run for another three months. Applications for the ‘First Grant’ of up to £7,500 must be made by close on 13 July 2020. For the ‘Second and Final Grant’, applications will open “in August”. There is no automatic second payment to those who claimed the first grant. Eligibility criteria will remain unchanged and it will be possible to claim only for the second grant.
Further guidance will be published on 12 June. In the interim a factsheet with basic information has been issued.
Amount of grant
In line with the reduction in the CJRS, the second grant payment will be limited to 70% of average monthly profits, subject to a maximum payment covering three months of £6,570.
The latest data (as at 24 May) show that:
- 2.3 million SEISS claims have been made, and
- claims are worth a total of £6.8 billion.
The issue of shareholder directors who draw remuneration via dividends remains the subject of much lobbying and was not addressed in the latest announcement from the Chancellor.
Loan Schemes
The latest lending statistics (as at 24 May) for the main loan schemes are:
| Scheme | Value of facilities approved | Number of facilities approved | Total number of applications | Average loan |
| Bounce Back Loan Scheme (BBLS) | £18.94bn | 606,069 | 769,137 | £31,251 |
| Coronavirus Business Interruption Loan Scheme (CBILS) | £8.15bn | 43,045 | 84,607 | £189,337 |
| Coronavirus Large Business Interruption Loan Scheme (CLBILS) | £0.82bn | 154 | 502 | £5,324,675 |
Government borrowing
Government borrowing figures for April released by the Office for National Statistics have underlined the impact of the Covid-19 pandemic on government finances. The government is provisionally estimated to have borrowed £62.1 billion in April, the first month of the 2020/21 financial year.
At the time of the March 2020 Budget the Office for Budget Responsibility (OBR) had projected borrowing for the entire year at £54.8 billion. Following publication of the data, the Institute for Fiscal Studies said that ‘Borrowing of around £300 billion, or 15% of GDP… certainly seems plausible, a level which has not been reached since the Second World War.’ The extension of the CJRS and SEISS now mean that number could approach £350 billion.
Mortgage holidays
On 22 May the Financial Conduct Authority (FCA) published proposals to extend the availability of mortgage payment holidays by a further three months to 31 October. Consultation on the proposals ended on 26 May and a final announcement is now due.
The importance of mortgage holidays can be seen in recent figures released by UK Finance, the finance lobby group. Their data showed that as at 20 May 1.82 million mortgage holidays had been granted – equivalent to about one in six mortgages. The average monthly payment deferred was £755, of which £260 represented deferred interest, according to UK Finance.
5th June 2020
