Employers’ National Insurance contributions and business rates could both be cut as Rishi Sunak contemplates “creative” ways to help firms beyond the end of the furlough scheme after almost 700,000 people lost their jobs between March and August.
The Chancellor said he would “find ways of effectively helping people” when the Treasury stops paying the wages of furloughed workers next month.
He ruled out an “endless extension” of the scheme, but said the Government would do “everything we can” to boost consumer confidence, which he described as “our greatest currency”.
The Telegraph understands that Mr Sunak is studying plans for a limited extension of the business rates holiday, which applies to the retail, hospitality and leisure industry and runs until the end of this financial year.
Business leaders have also asked the Government to consider a cut to employers’ National Insurance contributions to bring down the cost of employing staff.
Firms must pay NI contributions at a rate of 13.8pc of all earnings above £8,722 a year, although small businesses are given a £4,000 per year tax-free allowance.
Treasury sources said alterations to NI contributions were part of “a very large mix” of measures being studied by ministers, stressing that decisions on such measures were still some way off.
Mr Sunak was asked on Tuesday by former Treasury minister Mel Stride whether he agreed that “hundreds of thousands” of jobs still viable after Covid could be lost unless additional temporary support was given beyond the end of October.
The Chancellor replied: “Businesses do need support, which is why many of the interventions we have put in place last through to next year - for example the business rates holidays and indeed our support for the economy and jobs through initiatives like our stamp duty cut to catalyse the housing market.
"But I hope he will be reassured that throughout this crisis I've not hesitated to act in creative and effective ways to support jobs and employment and will continue to do so."
Earlier, Mr Sunak told the Cabinet: “Our greatest currency as an economy is confidence. We are an economy driven by consumer spending, so consumer confidence is crucial in driving our recovery and we should be doing everything we can to boost that.”
He said helping people get back into work or finding new work was his “number one priority”, but in a reference to the furlough scheme he added: “Indefinitely keeping people out of work is not the answer.”
The British Chambers of Commerce is among the groups that have asked Mr Sunak and Business Secretary Alok Sharma to help employers by cutting NI contributions, as well as extending the business rates holiday for sectors worst affected by coronavirus.
A BCC spokesman said: “We need to cut the overall cost of employing people. A lot of businesses are telling us that if they have to continue paying these things they may not make it past Christmas.”
Today is the last day employers can give employees the required 45-day notice period if they intend to make 100 or more proposed redundancies at the end of the furlough period.
Labour leader Sir Keir Starmer called for “new targeted support” to replace the furlough scheme for “those sectors that most need it”.
“It makes no sense at all for the government to pull support away now in one fell swoop,” he warned.
Economists warned the “worst is yet to come” for the jobs market after the Office for National Statistics revealed the number of workers on payrolls has plunged by almost 700,000 between March and August.
Redundancies in the three months to July rose at the fastest pace since 2009, climbing 48,000 on the quarter, with younger and older workers bearing the brunt of the pain.
The official unemployment rate rose for the first time since the pandemic struck, climbing marginally from 3.9pc to a two-year high of 4.1pc. But economists expect the furlough-distorted figure to soar much higher in the coming weeks and months with forecasters expecting unemployment to hit 8pc by the end of the year.
Josie Dent at the Centre for Economics and Business Research warned the “worst is yet to come, as the end of the furlough scheme draws near”. “With many businesses still struggling to cover costs amid the recession, the rising costs of having workers on furlough is likely to have forced businesses into making redundancies,” she explained.
Investec economist George Brown predicted the Chancellor could “well accede to calls for more targeted support in the autumn” given a “significant proportion” of the workforce is still on furlough. He warned: “It is not wholly surprising that employers have not brought back more staff; GDP was 11.7pc below pre-pandemic levels in July and the recovery remains uncertain.”