Government of the United Kingdom's financial response to the COVID-19 pandemic

The Coronavirus Job Retention Scheme is a furlough scheme in the United Kingdom in response to the 2020 coronavirus pandemic. It was announced by Rishi Sunak, the Chancellor of the Exchequer, on 20 March 2020.[1] The scheme was announced on 20 March as providing grants to employers to pay 80% of a staff wage each month, up to a total of £2,500 per person per month. The scheme initially ran for three months and was backdated to the start of March.[2] Following a three-week extension of the countrywide lockdown the scheme was extended until the end of June 2020.[3][4]

Initially the scheme was only for those workers who started work at their company on or before 28 February 2020; this was later changed to 19 March 2020 (i.e. the day before the scheme was announced), making 200,000 additional workers eligible.[5] On the first day of operation 140,000 companies applied to use the scheme.[6][7]

At the end of May, the scheme was extended until the end of October but confirmed that it would end at that point. The cost has been estimated at £14 billion a month to run.[8] The decision to extend the job retention scheme was made to avoid or defer mass redundancies, company bankruptcies and potential unemployment levels not seen since the 1930s.[9] From August, National Insurance and pension contributions must be paid by employers, as well as 10% of wages from September, rising to 20% in October. From July staff can return to part time work without affecting eligibility, but companies must cover all wages for the hours worked. In addition, the scheme will close to new entrants from 30 June, and as claims are made for staff at the end of a three week period, the last date an employee can be furloughed for the first time is 10 June.[10][11][12][13] As of 27 May, 8.4 million employees had been furloughed under the scheme.[14]

In March the Self Employed Income Support Scheme (SEISS) was announced.[15] The scheme paid a grant worth 80% of self employed profits profits up to £2,500 each month, on companies who's trading profit was less than £50,000 in the 2018-19 financial year or an average less than £50,000 over the last three financial tax years for those who suffered a loss of income. Her Majesty's Revenue & Customs (HMRC) were tasked with contacting those who were eligible and the grant was taxable. The government also had announced a six month delay on tax payments. Self employed workers who pay themselves a salary and dividends are not covered by the scheme and instead had to apply for the job retention scheme.[16] The scheme went live on 13 May.[17] The scheme went live ahead of schedule and people were invited to claim on a specific date between 13 and 18 May based on their Unique Tax Reference number. Claimants would receive their money by 25 May or within six days of a completed claim.[18] By 15 May, more than 1 million self employed people had applied to the scheme.[19] At the end of May a second grant of up to £6,570 that would be paid in August was announced.[20]

The government announced Retail, Hospitality and Leisure Grant Fund (RHLGF) and changes to the Small Business Grant Fund (SBGF) on 17 March. The SBGF was changed from £3,000 to £10,000, while the RHLGF offered grants of up to £25,000.[21][22][23] £12.33 billion in funding was committed to the SBGF and the RHLGF schemes with another £617 million added at the start of May.[24] RHLGF and SBGF only applied to business in England.[25] The government pledge £3.5 billion in funding for Northern Ireland, Scotland and Wales to support to businesses.[21]

On 23 March the Government announced the Coronavirus Business Interruption Loan Scheme (CBILS) for small and medium-sized businesses and Covid Corporate Financing Facility for large companies.[26] The government banned banks from seeking personal guarantees on Coronavirus Business Interruption loans under £250,000 following complaints.[27][28] Coronavirus Large Business Interruption Loan Scheme (CLBILS) was announced on 3 April and later tweaked to include more companies.[28][29] In May the amount a company could borrow on the scheme was raised from £50 million to £200 million. Restrictions were put in place on companies on the scheme including dividends payout and bonuses to members of the board.[30] On 20 April the Government announced a scheme worth £1.25 billion to support innovative new companies that could not claim for coronavirus rescue schemes.[31]

The government additionally announced the Bounce Back Loan Scheme (BBLS) for small and medium size businesses on 27 April. The scheme offered loans of up to £50,000 and was interest free for the first year before an interest rate of 2.5% a year was applied, with the loan being paid back within six years. Businesses who had an existing CBILS loan of up to £50,000 could transfer on to this scheme, but had to do so by 4 November 2020. The scheme launched on 4 May.[32][33] The loan was 100% guaranteed by the government and was designed to be simpler than the CBILS scheme.[34][35] More than 130,000 BBLS applications were received by banks on the first day of operation with more than 69,500 being approved.[36][34] On 12 May almost £15 billion of state aid had been given to businesses.[37]

The Guardian reported that after the government had suspended the standard tender process so contracts could to be issued "with extreme urgency", over a billion pounds of state contracts had been awarded under the new fast-track rules. The contracts were to provide food parcels, personal protective equipment (PPE) and assist in operations. The largest contract was handed to Edenred by the Department for Education, it was worth £234 million and was for the replacement of free school meals.[38] Randox Laboratories who have Owen Paterson as a paid consultant were given a £130 million contract to produce testing kits.[39] In addition 16 contracts totalling around £20 million were agreed to provide HIV and malaria drugs, which were thought might be a cure to COVID-19.[40]

The UK government announced a £750 million package of support for charities across the UK. £370 million of the money was set aside to support small, local charities working with vulnerable people. £60 million of £370 was allocated to charities in Scotland, Wales and Northern Ireland in the following breakdown

• £30 million for Scotland
• £20 million for Wales
• £10 million for Northern Ireland.[41][42]

On 13 May the Government announced that it was underwriting trade credit insurance, to prevent businesses struggling in the pandemic from having no insurance cover.[43][44]

Shadow chancellor John McDonnell, urged Sunak to act rapidly to help. Liberal Democrat leader Ed Davey said people were being unfairly “hung out to dry”, with “their dream jobs turning into nightmares” after hundreds of MPs have contacted the chancellor.[45]

The Institute for Employment Studies estimated that 100,000 people could not be eligible for any type of government help as they started a new job to too late to be included on the job retention scheme. While UKHospitality informed the Treasury Select Committee that between 350,000 and 500,000 workers in its sector were not eligible.[46][47]

Following changes to the scheme at the end of May, the director of the Northern Ireland Retail Consortium said that being asked to pay wages when businesses had not been trading was an added pressure. While the Federation of Small Businesses were surprised that the Chancellor had announced a tapering of the scheme when ending it.[48] Northern Ireland's economy minister Diane Dodds said that changes to the scheme could be very difficult for some sectors uncertain about when they can reopen, particularly in the hospitality and retail sector, whilst finance minister Conor Murphy said that it was too early in the economic recovery.[49]

In 2002, UK Chancellor Rishi Sunak promised to do “whatever it takes” to protect business from Covid19 damage, laying out a mix of tax breaks, employee subsidies (‘furloughing’) as well as grants and loans to business that will cost more than £100 billion. TaxWatch UK[50] has analysed the Bank of England's list of 53 beneficiaries of business loans, and found that thirteen companies – receiving 29% of the money – have links to offshore tax havens (including Chanel in the Cayman Islands or Wizz Air in Jersey), or sweetheart locations like the Netherlands (where construction equipment manufacturer JCB is registered). JCB paid family shareholders a dividend of £75 million in 2018.[51] The BBC reported that Tottenham Hotspur football club secured a low-interest loan of £175 million, despite being owned by billionaire tax exile Joe Lewis.[52] Wizz Air took government money whilst granting generous share options to senior managers, worth £1.5 million to chief executive József Váradi and £850,000 to chief operating officer Diederick Pen.[53] The Times reported that two of the biggest beneficiaries of Covid emergency funding paid no UK tax at all.[54] CNH Industrial, which owns the Iveco lorry firm, borrowed £600 million; the giant German chemicals group BASF claimed £1 billion. Both companies claimed credits from the taxpayer in recent years, rather than paying in. Another claimant, Baker Hughes, is a subsidiary of General Electric which is contesting an HMRC claim of £1 billion tax fraud. “The disclosures have raised questions over why overseas corporations and wealthy individuals have been given what is effectively state aid”.[55]

• Coronavirus Job Retention Scheme: step by step guide for employers, Gov.uk
• "The Coronavirus Act 2020 Functions of Her Majesty's Revenue and Customs (Coronavirus Job Retention Scheme) Direction" (PDF). publishing.service.gov.uk. 15 April 2020.
• "FAQs: Coronavirus Job Retention Scheme" (PDF). House of Commons Library. 7 May 2020.