Concerns about Wales’ small businesses as Chancellor says employers must share furlough costs

Rishi Sunak. Picture by Chris McAndrew (CC BY 3.0).

There are concerns for Wales’ small businesses after the Chancellor announced that the cost of the furlough scheme will be shared between the UK Government and employers.

Rishi Sunak announced that the Government’s furloughing scheme would be extended until October, but with the Government’s contribution reducing and employers being expected to make up the difference.

Workers will continue to receive 80% of their wages if they cannot work but the cost will be shared with employers from the end of July.

The Welsh Liberal Democrats warned that many small businesses will not be able to afford this additional financial burden.

Welsh Liberal Democrat Leader Jane Dodds said she was “deeply concerned” that small businesses “will be left shouldering more and more of the financial burden from August”.

“There are thousands of small businesses across Wales who have not been seeing any income at all over the past few weeks because of the lockdown,” she said.

“Local shops, hairdressers, exercise facilities and others simply do not have the money to pay 20% of their employees’ wages.

“Expecting these smaller businesses to start shouldering the cost will leave many facing the onerous choice of asking staff back to work, taking on extra debt in the hope things will improve before their repayments begin, or calling it a day on their business now.

“If we want our economy to bounce back, then we need to ensure the policy reflects the reality on the ground. I hope the Chancellor reconsiders this approach.”

 

‘Dignity’

Announcing the move in response to an urgent question from Labour, Sunak told the Commons: “I’m extending the scheme because I won’t give up on the people who rely on it.

“Our message today is simple: we stood behind Britain’s workers and businesses as we came into this crisis, and we will stand behind them as we come through the other side.”

The government had faced criticism after a senior government source briefed workers were “addicted” to the furlough and needed to be “weaned off” the scheme. But Sunak disowned the language used in some briefings.

The chancellor said: “The use of the word addiction is not one that I have ever used, and not one that I agree with.

“Nobody who is on the furlough scheme wants to be on this scheme.

“People up and down this country believe in the dignity of their work, going to work, providing for their families.

“It is not their fault that their business has been asked to close, it is not their fault that they have been asked to stay at home, and that is why I established this scheme to support these people and their livelihoods at this critical time.”

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Plain citizen
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Plain citizen

Should Welsh taxpayers bankroll Welsh businesses to pay wages of Welsh employees at levels above what they would expect to get on Universal Credit (UC)? As employers pay employers NIC which I think is about 13% (please correct me) and administer the PAYE system for the Gov’t plus pension I think they are entitled to some help. If the government says it wants a 50/50 split of furloughed income with employers some will say no and unemployment will rocket. What then? Is the Welsh Gov’t going to show its independence and raise taxes to fund these employees wages? I’m assuming… Read more »

Huw Davies
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Huw Davies

This type of state socialism/capitalism “marriage of convenience” is fine for short term crisis. Where it looks like going on for longer periods then the interventionist model becomes hazardous as it adds further dependency at a time when we should be looking to wean the country ( UK and the 4 nations, same problem different scale) off such a culture. And “culture” is exactly what it is. Well paid business leaders yelling out for help and bailouts yet only months ago demanding a firmer line in dealing with “benefits scroungers”. Well what we have are the 2 extremes of the… Read more »

E Williams
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E Williams

Here’s a farce… Cardiff airport furlough their staff on 100% salaries, not 80%. A private business that was non viable before the crisis let alone now, A business haemorrhaging multiple Welsh Gov bailouts without any possibility of paying it back. You can imagine the director discussions,.. It’s not us paying so lets max out while we can. I wonder how many other quangos are doing the same. We’ll be paying for crisis for a long while if not for the rest of our lives. With this kind of public money mismanagement, generations in Wales will be paying even more, for… Read more »

Huw Davies
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Huw Davies

It’s so much easier to be liberal with the funds when they are not your own. Managements like those at the airport have supped at the public trough for a long time so they are quite used to ignoring the constraints or the need to restraint, going for the easy options. Instead of maxing out on furlough arrangements they should go onto short time working if necessary, say 3 day week ( remember that !) and share the pain of the wage reduction. Government could support that sort of arrangement because it runs at a lower level than the 80%… Read more »

Kerry Davies
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Kerry Davies

Two points here; the furlough scheme pays the lower 80% of employee wages, if the employer so wishes they are free to top up the wage to the full amount. That is and always has been one of the intentions of furlough. This has advantages in that they retain the contracts of their people who then can’t go gallivanting off any time they like. In cases like the airport where specialist staff do jobs involving serious amounts of training it is worth paying them to retain those skills, reduce the need to train replacements and actually have a crew ready… Read more »

Plain citizen
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Plain citizen

I very much doubt it. Any analysis of the labour market shows it is not just wage rates that make a difference between retention and not. Cardiff White Elephant (sorry airport) is being heavily subsidised by taxpayers from all over Wales and the UK. It gets Cardiff Labour union votes but it needs subsidy because passengers won’t pay the economic cost of flying from there ie cost of capital plus operating costs. Great for the Cardiff elite to fly to London to join with the other wine bar socialists and dole out the quango jobs for the boys and girls.… Read more »