U.K. Plans Job Aid for Hot Spots With Virus ‘Out of Control’

U.K. Chancellor of the Exchequer Rishi Sunak announced new support for jobs in coronavirus hot spots, as tougher restrictions are readied to contain a pandemic the government warned is “getting out of control.”

Under Sunaks plans, announced Friday afternoon, the government will pay two-thirds of the wages of workers in companies forced to close as a result of virus restrictions, and will also offer increased cash grants while they are shuttered.

The extra support, which Treasury officials said is expected to amount to hundreds of millions of pounds a month, was announced before new curbs next week which could involve closing bars and restaurants in areas of England where the disease is spreading most rapidly.

Read more: U.K. Plans Emergency Help for Firms Facing Tighter Rules in Days

Rishi Sunak

Photographer: John Sibley/AFP via Getty Images

The new plan comes just days after Sunak opted to end the blanket aid for jobs under his original program, in favor of a policy that only helped support part-time work in “viable” roles.

While that was an attempt to curb the unprecedented cost of the plan, economists warned it could see unemployment spike beyond 3 million people. At the time, Sunak said he couldnt support every job -- but the resurgence of coronavirus has forced him into more action.

‘Chaos and Incompetence’

“The fact the Chancellor is having to tear up his Winter Economic Plan before the autumn is out demonstrates the chaos and incompetence at the heart of government,” Anneliese Dodds, economy spokeswoman for the opposition Labour Party, said in an email. “His delay in delivering support has caused unnecessary anxiety and job losses.”

Chancellor announces a u-turn on furlough scheme - will now remain for firms required to close by local or national rules

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— Torsten Bell (@TorstenBell) October 9, 2020

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Starting on Nov. 1 and lasting six months, firms closed by any curbs will only have to cover tax contributions for employees that arent working -- equating to about 5% of their wages.

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Thats a better deal than the 55% they were due to pay for staff fulfilling just a third of their normal hours under the previous proposals, and throws a lifeline both to firms which may be closed in coming weeks and also those, such as nightclubs, which are yet to open their doors since the pandemic hit.

Companies will also receive larger grants if they are forced to close, with the biggest receiving as much as 3,000 pounds ($3,900) a month.

Still, workers themselves will see their overall pay drop to 66% of normal, from 77% under the previous plan, while the extra support may come to late for those who have already been let go ahead of the end of the furlough plan.

‘Unbelievably Serious’

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The ramping up of emergency stimulus has echoes of the action taken by the Treasury in the early days of the pandemic, and comes as Public Health England warns the country faces a “definite and sustained” rise in infections.

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The U.K. is in an “unbelievably serious situation” with the pandemic “getting out of control,” skills minister Gillian Keegan told the BBC late Thursday.

Rising Rapidly

Coronavirus infections doubled in England in the week to Oct. 1

Source: Office for National Statistics

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The Office for National Statistics said Friday the infection rate almost doubled in the week through Oct. 1, with an estimated 17,200 new cases each day. The highest rates are in northern England, which is expected to be the focus of new restrictions brought in by Prime Minister Boris Johnsons team next week.

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Another study, conducted by Imperial College, London, found 1 in 170 people in England had the virus between Sept. 18 and Oct. 5, with 45,000 new infections every day in the period. The report, based on tests of 175,000 volunteers, identified an eightfold increase in infections in people over the age of 65 compared with the previous period.

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‘Unnecessary Death’

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“Our robust findings paint a concerning picture of the growing epidemic across England,” Paul Elliott, a director at Imperials School of Public Health, said in an emailed statement. “While certain areas are worse affected, if left unabated then infection trends will follow nationwide and could lead to high levels of unnecessary death and illness from the disease.”

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London Mayor Sadiq Khan said new stricter lockdown restrictions for the capital are inevitable. London is at a “very serious tipping point,” he told LBC Radio on Friday. Any new curbs would apply across the city and not borough-by-borough, he said.

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London Mayor Sadiq Khan tells LBC:

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“I'm increasingly alarmed that the spread of coronavirus in our city, and I'm warning fellow Londoners that further restrictions are highly likely.” @SadiqKhan | @ShelaghFogarty

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— LBC (@LBC) October 9, 2020

The economic outlook is also looking increasingly dire. On Friday, a report showed the U.K.s recovery slowed dramatically in August -- a month where virus restrictions were at their lowest and government support for the hospitality industry peaked. That leaves growth on course to fall short of Bank of England forecasts, boosting the likelihood of more monetary stimulus later this year.

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Pub Risk

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This week, Englands chief medical officer, Chris Whitty, met with politicians from northern England and the Midlands to stress the sharp up-tick in the virus, and showed data demonstrating how pubs and restaurants are driving the infection rate.

Meanwhile hospitalization rates are approaching the level they were at just before the country went into a national lockdown in March, according to Mark Walport, who sits on the governments emergency scientific committee.

“Any environment, but particularly indoors, that encourages people to mix closely, presents an increased risk,” he told BBC radio.

Since the national lockdown was lifted in June, the government has adopted what it calls a “whack-a-mole” approach, using localized restrictions to try to contain outbreaks. But the strategy hasn‘t reduced infection rates in many areas. Local authorities say that’s at least in part because there was insufficient financial support for people told to self-isolate.

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(Updates with Labour reaction in sixth paragraph)

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