The government will pick up “most of” the wages of workers as the coronavirus pandemic continues to devastate many businesses , says Chancellor Rishi Sunak.
He said government grants would cover 80% of the salary of staff who are kept on by their employer but are unable to work.
The new coronavirus job retention scheme will cover wages up to £2,500 a month.
Mr Sunak said the Universal Credit standard allowance will be increased by £1,000 a year for the next 12 months, while the working tax credit basic element will be boosted by the same amount.
He also said he would defer the next quarter of VAT payments for businesses until the end of June, in a £30bn injection into the economy.
The measures to strengthen the welfare system will benefit more than four million of the most vulnerable households, he said.
“Employers will be able to contact HMRC for a grant to cover most of the wages of people who are not working but are furloughed and kept on payroll rather than being laid off,” he said at the prime minister’s press conference.
Mr Sunak pledged £1bn for renters by boosting housing benefit and Universal Credit, and added that the welfare payments’ “generosity” would be increased to allow the local housing allowance to cover at least 30% of market rents.
“Our planned economic response will be one of the most comprehensive in the world,” he reassured.
“To all those at home, right now anxious about the days ahead, I say you will not face this alone.”
However, he warned: “I cannot promise you that no one will face hardship in the weeks ahead.”
The new scheme means self-employed workers will be able to access Universal Credit payments in full, at a rate equivalent to statutory sick pay eligible to employees.
The chancellor’s announcement came after criticism that his £350bn emergency support package for the economy earlier this week concentrated on businesses but did little for their staff.
Boris Johnson also used the press conference to order pubs, gyms, cafes and restaurants across the country to close.
He said it was necessary to reduce “unnecessary” social gatherings by 75% in order to have an impact on the infection rate.
The UK also saw another 714 confirmed cases of coronavirus diagnosed in a day, bringing its total number to 3,983.
Sky News’ economics editor Ed Conway said the economy is “having a cardiac arrest”.
“We have never seen anything like this. We never saw anything like this in wartime Britain, previous recessions and previous depressions.
“The government is stepping in and paying people’s salaries – that is incredibly unusual.”
He added that the “radical” move shows how “desperately concerned” the government is about the state of the economy.
Mr Sunak said the next self-assessment payments would be deferred to January 2021 in a bid to further support self-employed people.
He said the safety net would be further strengthened by extra help for renters who may struggle with payments over the next few months.
“The actions I have taken today represent an unprecedented economic intervention to support the jobs and incomes of the British people,” Mr Sunak told the press conference.