PRIMER: UK Chancellor Sunak Winter Economic Plan ~12:30BST/07:30ET

• Expected to unveil a wage subsidy scheme to support the labour force through Winter/potential second wave of COVID-19; the statement means that the Autumn Budget will not occur. Reports & commentary from Officials around the matter are aligned on the narrative that the Chancellor will not be extending the furlough scheme, which expires end-October.


• Instead, the Chancellor will reportedly unveil a wage subsidy scheme which has been compared to the Kurzabeit or short work system used in Germany, and would serve to assist part-time workers. Reports via the Times indicate that this policy would see Co’s pay the wages for hours employees are working; when they are not working, the wage bill will see employers and the Gov’t each fund 1/3, while employees will not be paid the final 1/3. Cost of such a scheme is reportedly around the GBP 500mln a month mark. Alternatively, employers may be able to choose to receive the GBP 1k ‘job retention bonus’ which is already in place for workers returning from furlough. In terms of the scope of the wage scheme, the Chancellor has reportedly ruled out making this a sector-specific programme and instead it will seemingly be broad based.


• Interestingly, Chancellor Sunak has reportedly been pushing to allow for a breach of the pension ‘triple-lock’ guarantee which ensures that pensions increase by the largest of 3 variables including earnings growth, price inflation or 2.5%. Given concerns that we could see a considerable increase in state pensions, of at least 2.5%, when compared to what other workers are seeing; additionally, the budgetary costs of this could be considerable. However, reports via The Times indicate that PM Johnson has overruled the Chancellor on this matter and as such the triple lock system will remain in place.


• Elsewhere, extensions of the VAT cuts for hospitality/tourism are a possibility, The Times indicates such an extension will be until March 2021, and press reports indicate existing business support schemes will also be extended as part of the plan; the Chancellor is also said to be under pressure to unveil some form of targeted support for sectors of the economy hardest hit at present e.g. arts.


• Note, while the Autumn budget has been cancelled, a spending review must still be completed prior to December so next-year’s budgetary preparations can be completed on time.

24 Sep 2020 - 08:09- Research Sheet- Source: Newsquawk