How Sunak’s $131 Billion Virus Aid Package Is Being Rolled Out

U.K. Chancellor of the Exchequer Rishi Sunak said he can’t save every job and every business but has vowed to do “whatever it takes” to help companies and workers cope with the economic fallout from the coronavirus pandemic. The result is a support package unprecedented in peacetime Britain: the Office for Budget Responsibility on Thursday estimated the response so far will cost almost 104 billion pounds ($131 billion) in the current fiscal year.

Here’s a rundown of the measures, and their takeup so far:

Extra Funding:

The government has spent an extra 16 billion pounds on public services, according to the OBR.

Rishi Sunak

Photographer: Daniel Leal-Olivas/AFP via Getty Images

• National Health Service: Delivering his Budget on March 11, Sunak said “whatever extra resources our NHS needs to cope with Covid-19, it will get.” He announced a 5 billion-pound emergency response fund available to the NHS and other public services.
• Welfare: Claimants of contributory employment and support allowance benefits can claim from day one rather than day eight of being unemployed. The government removed the minimum income floor on Universal Credit -- including for the self-employed -- and increased the standard allowance by 1,000 pounds per year. The Working Tax Credit basic element was also raised by 1,000 pounds per year. The measures are worth about 7.5 billion pounds.
• Sick Pay: Statutory sick pay will be paid from day one, not day four, and extended to people advised to self-isolate regardless of whether they have Covid-19 symptoms. For as many as 2 million companies employing 250 people or fewer, the government will cover payments up to 14 days -- a commitment of as much as 2 billion pounds.
• Hardship Grants: 500 million pounds to be distributed by local authorities to directly support vulnerable people in their areas.

Results so far: The number of people starting the process of making a Universal Credit claim topped 1.8 million through April 12, according to government data. The benefit is paid to people without work or on low incomes.

Business Grants

• Cash grants of 10,000 pounds to 700,000 of the country’s smallest businesses -- those that don’t pay business rates.
• Retail, hospitality and leisure sector businesses with a so-called ratable value of less than 51,000 pounds are eligible for grants of 25,000 pounds.
• Some 12 billion pounds was paid out to councils to fund the grant programs, according to Sunak.

Results so far: The Business Department on Thursday tweeted a regional breakdown suggesting 7.5 billion pounds of the grant money has been paid out by councils.

Tax Breaks

• Business Rates: All hospitality, retail and leisure firms have a one-year business rates holiday. The Centre for Policy Studies values the measure at 13 billion pounds.
• VAT Holiday: No business will have to pay value-added tax in the April-June quarter, with payments deferred until the end of the financial year. Sunak said that amounts to a cash injection of 30 billion pounds.
• On Thursday, the Treasury slashed to zero the VAT rate on personal protective equipment, saving care homes and businesses more than 100 million pounds. It also brought forward by seven months the abolition of VAT on electronic books and newspapers.
• Income Tax: The self-employed are able to defer their payments to January.

Loan Guarantees:

On March 17, Sunak announced 330 billion pounds of loan guarantees -- equivalent to 15% of GDP. This was made up of:

• Covid Corporate Financing Facility: A Bank of England-administered program that allows large companies with investment-grade credit ratings to issue short-term debt in the form of commercial paper lasting as long as a year, to help them cover immediate cash needs.
• Coronavirus Business Interruption Loan Scheme: The program was first announced on March 11 and later extended in scope, allowing small companies to access loans of as much as 5 million pounds, with no interest to be paid for the first 12 months. To encourage commercial banks to lend the money, the government guaranteed to incur the first 80% of any losses on the loans, which first became available on March 23. Sunak on Monday effectively ruled out raising the Treasury guarantee to 100%.
• Coronavirus Large Business Interruption Loan Scheme: Originally announced by Sunak on April 4 and since expanded in scope, the program allows for companies with an annual turnover greater than 45 million pounds to access loans of up to 25 million pounds. Those with turnover of more than 250 million pounds can borrow as much as 50 million pounds.
• On Monday, Sunak announced a new “bounce back” loan program for the smallest companies that’s 100% backed by the state. Businesses will be able to access loans of 2,000 pounds to 50,000 pounds, with the government paying the interest and fees in the first year. They will be available from Monday.

Results so far: As of April 29, the Bank of England had purchased a net 15.9 billion pounds of commercial paper under the CCFF program, benefiting 93 businesses, with full approval pending for another 103 companies.

Under the business interruption loans programs more than 25,000 loans worth 4.1 billion pounds had been approved so far, the Treasury said on Thursday. That’s out of 52,000 formal applications.

Paying Wages:

• Coronavirus Job Retention Scheme: Any employer regardless of size or profitability can furlough its workers, and the government will pay 80% of their wages up to a total of 2,500 pounds a month -- so long as the employee remains linked to the job and doesn’t work during the furlough period. Employers are allowed to top up employee salaries. The program was backdated until March 1 and is currently scheduled to run until June 30. It covers all those on a company’s payroll by March 19. The OBR estimates the cost, net of income tax levied on the payments, at 39 billion pounds.
• Self-Employed Workers Scheme: On March 26, Sunak said the government would pay the self-employed a taxable cash grant worth 80% of their average monthly profits, up to a maximum of 2,500 pounds, for at least three months. The program will be open for anyone with an annual income of up to 50,000 pounds, and is due to be up and running by early June. It will cost 10 billion pounds over a three-month lockdown, according to the OBR.

Results so far: The furlough program is supporting about 4 million jobs with 500,000 employers so far, Sunak said on Monday.

Housing:

• Mortgage Holiday: Sunak came to an agreement with lenders to grant homeowners in difficulty a three-month mortgage holiday.
• For renters, Sunak increased housing benefit and Universal Credit to cover at least 30% of market rates -- a measure he valued at almost 1 billion pounds.

Results so far: Some 1.6 million customers had been granted mortgage holidays, as of April 24, according to UK Finance. That’s one in seven of all mortgages, with the average monthly interest payment deferred per customer estimated at 755 pounds.

Sectoral Deals

• Trains: The Department for Transport said on March 23 it will take on the revenue and cost risk for the nation’s rail services for six months, with operators continuing to manage day-to-day services for a “a small, predetermined management fee.”
• Buses: On April 3, the government announced a 400-million pound package to keep bus services running nationwide, including 167 million pounds of new money.
• Freight and Ferries: The Department for Transport last week announced support for freight and ferry routes, including 17 million pounds for links between mainland Great Britain and Northern Ireland and 10.5 million pounds for links to the Isle of Wight and the Scilly Isles. There was also an unspecified amount of support for routes to continental Europe.
• Charities: Sunak on April 8 announced a 750 million-pound package to help charities and hospices weather the crisis.
• High-Growth science and technology: On April 20, Sunak announced a 1.25 billion-pound package of support for technology and life sciences firms driving innovation. Small and medium-sized companies focused on research and development were given 750 million pounds of grants and loans, while high-growth companies hit by the pandemic were offered loans worth 500 million pounds. Under that program, companies would get loans of between 125,000 pounds and 5 million pounds, with private investors matching the government commitment. If the loans aren’t repaid, they will convert to equity stakes.

Read More:

• U.K. Fights Virus Fallout With Huge $39 Billion Stimulus
• U.K.. Releases ‘Wartime’ Funding to Save Economy from Virus
• U.K.’s Sunak Writes Blank Check to Rescue Virus-Hit Economy
• Millions of Self-Employed British Workers Are Promised Help

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Alex Morales in London at amorales2@bloomberg.net

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Tim Ross at tross54@bloomberg.net

Andrew Atkinson

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