Rishi Sunak has attempted to head off mounting anger over plans for imminent new Covid restrictions by announcing a new furlough scheme that will pay two-thirds of workers’ wages in hospitality firms ordered to close their doors.
The hastily arranged announcement was made in a video message from the Treasury, as Downing Streetbriefed local leaders in the north-east and north-west of England about tough curbs set to be introduced next week.
The Guardian understands that under the new regime pubs and bars in Merseyside and other parts of northern England will be ordered to close but restaurants will be allowed to remain open until 10pm.
Similar restrictions are expected to be announced in Nottinghamshire as well as Greater Manchester, West Yorkshire and Newcastle. The rules will be reviewed after a month, sources said.
To help alleviate the financial damage, Sunak said that from 1 November the government would subsidise pay by providing grants to all UK companies ordered to shut their doors – likely to be pubs, bars and restaurants.
Some leaders in the North of England, described the package as a “kick in the teeth” because it would not stave off the inevitable financial hardship of another lockdown.
In a joint statement, the mayors of Greater Manchester, the Sheffield and Liverpool city regions and North Tyne said: “What has been announced by the chancellor today is a start but, on first look, it would not appear to have gone far enough to prevent genuine hardship, job losses and business failure this winter.”
Industry experts also denounced the package. “The level of support announced by the Chancellor is nowhere enough to compensate pubs being forced to close,” said Greg Mulholland, of the Campaign for Pubs. “Many publicans will be forced into even more debt just to survive. There is real anger when pubs have been working hard to operate safely.”
With Downing Street under pressure from Tory MPs, local leaders and the hospitality industry, the chancellor set out yet another new scheme, insisting “we will do whatever is necessary to protect jobs and livelihoods as the situation evolves.”
There will also be new grants paid directly to businesses to help them meet other costs. The Treasury said the total cost of the package over six months would run into billions of pounds.
Ministers have been moved to act after a significant acceleration in the spread of the disease, despite local lockdown measures having been in place for weeks across a swath of north-east and north-west England.
Official figures showed 87 deaths were recorded on Thursday, while the latest survey data from the Office for National Statistics showed a sharp rise in the infection rate, with an estimated 17,200 new cases per day, up from 8,400 a day the previous week.
Despite the resurgence in the virus, many Conservative MPs remain sceptical about the need for widespread shutdowns and critical of Downing Street’s handling of the pandemic.
One senior Tory suggested Sunak, who told the Conservative party conference there was a “sacred duty” to repair the public finances, had been resistant to providing fresh economic support. “There’s a tussle going on: Rishi is essentially a 1930s small-c conservative: he wants to raise taxes and balance the books.”
However, Treasury officials insisted the new scheme was just an add-on to the job support scheme, and had already been worked out over the summer as part of a “menu” of options to be drawn upon if new coronavirus restrictions demanded it.
The move signals the government’s determination to press ahead with tough restrictions after what one government source called “lively conversations” in recent days about how a new three-tier system of controls should work.
It came little more than a fortnight after Sunak launched his winter economic plan and said it was “fundamentally wrong to hold people in jobs that only exist inside the furlough”.
The shadow chancellor, Anneliese Dodds, who had repeatedly called for a targeted furlough scheme to help firms told to close, said: “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. His delay in delivering support has caused unnecessary anxiety and job losses.
“None of this was inevitable if the chancellor had just taken his fingers out of ears and listened to the warnings from Labour and others.”
Sunak described the measure as part of an “economic toolkit”, and Treasury officials insisted it was not a new furlough scheme. But economic experts said the structure of the scheme was very similar to the one in place for much of this year, and questioned why it had not been established earlier.
Torsten Bell, the director of the Resolution Foundation, a thinktank, described Sunak’s move as a U-turn and said the delay in announcing it was likely to have cost jobs.
“It has been clear for some time that this form of a more sectorally and geographically targeted furlough scheme would be required to see us through a difficult winter. The delay in putting it in place will have come at a high price in jobs lost,” he said.
Ministers are preparing to follow Scotland with tougher new local restrictions, starting in the north where Covid-19 cases have dramatically increased in recent weeks.
Official figures show that more than one in 10 workers in Britain – almost 3 million people – were still furloughed in early September.
Under the new plan, the government will support eligible businesses by paying two-thirds of each employee’s salary, up to a maximum of £2,100 a month.
This is a higher payout than the furlough scheme is offering currently. It originally offered 80% support but had been gradually reduced to 60%, with a cap of £1,875, from the start of this month.
The new grant that is designed to help cover other fixed costs is worth up to £3,000 per month for firms in England. Devolved administrations in Wales, Scotland and Northern Ireland will receive a total of £1.3bn in increased funding this year to cover similar measures.
The Treasury said businesses would only be eligible to claim the grant while they were subject to lockdown restrictions. Employees must be off work for a minimum of seven consecutive days. The new scheme will be available for six months, with a review in January, and will be UK-wide.
The chief whip, Mark Spencer, indicated on Friday that there would be a vote in parliament next week on the new lockdown plans. “MPs will get to discuss and vote upon these new systems next week, I hope, and then we’ll be able to move forward,” he said.
Despite widespread concern about the economic impact of the measures, Tory rebels said they would be unlikely to try to vote them down unless Labour did so.
The Conservative MP Steve Baker, a ringleader of a group who have successfully pushed for more parliamentary scrutiny of restrictions in recent weeks, told the Guardian: “All the time Labour are voting for or abstaining from voting on government measures, the government will get its way, and therefore I will not be organising rebellions against the government.
Sir Graham Brady, the chair of the 1922 Committee of Conservative backbenchers, said: “I will wait to see what the government proposes before I take a position. But it is essential that both the initial arrangements are approved by parliament and subsequent changes moving areas, or moving significant parts of the country into higher levels of restrictions should also be subject to regular review by parliament.
“If the restrictions were to lead to the complete closure of the hospitality sector, that would cause massive damage and significant unemployment.”