Sunak’s latest bailout package sends Britain’s annual budget deficit towards £400bn
Rishi Sunak’s latest bailout package for businesses could push Britain’s annual budget deficit above £400billion, experts warned last night.
Business leaders hailed the generosity of the compensation package, which will support struggling firms hit by Tier Two restrictions.
The Chancellor unveiled changes to the Job Support Scheme, which replaces the Job Retention Scheme when it closes on October 31.
Handouts: Chancellor Rishi Sunak has unveiled changes to the Job Support Scheme, which replaces the Job Retention Scheme when it closes on October 31
Under the revised scheme, employers will have to pay a smaller portion of wages of furloughed staff who have returned to work part time.
Staff will also have to work fewer hours to qualify for support. At the same time, taxpayer subsidies have doubled – with the Government funding 62 per cent of the hours not worked.
And the Chancellor said the Treasury would provide grants for struggling companies in areas under Tier Two restrictions.
They will be worth up to £2,100 each month and will focus on companies in the hospitality, accommodation and leisure sectors.
The Treasury refused to provide any guidance on how much the new lifelines will cost. A Whitehall source said it depended on take-up of the scheme.
But it is thought the extra support could cost more than £22billion in total over six months.
This includes roughly £1billion a month for every 2m people signed up for the scheme.
The Treasury has previously indicated that between 2m and 5m will be supported by the wage subsidies.
This suggests it could cost up to £15billion over six months.
The bailout could push the annual deficit above £400billion, according to Capital Economics, which had predicted government borrowing was already on course to hit £390million even before the latest compensation package was announced.
Paul Dales, its chief UK economist, said: ‘The combination of the darkening of the economic outlook due to the latest Covid-19 restrictions and the Chancellor’s more generous Job Support Scheme mean there is every chance the budget deficit will top £400billion this year.’