Union and business leaders have largely welcomed news that the government will pick up “most of” the wages of workers as the coronavirus pandemic continues to shred the UK economy.

Chancellor Rishi Sunak said on Friday that government grants would cover 80% of staff salaries for those 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 he would do “whatever it takes” and called his plans “an unprecedented economic intervention to support the jobs and incomes of the British people”.

TUC general secretary Frances O’Grady said the announcement was “a breakthrough”, adding: “Employers across the economy can now be confident that they will be able to pay their wage bills.

“They must urgently reassure their staff that their jobs and livelihoods are safe.”

Len McCluskey, general secretary of Unite, said the package was a “historic first for this country” and Dame Carolyn Fairbairn, director general of the CBI, said it marked “the start of the UK’s economic fightback – an unparalleled joint effort by enterprise and government to help our country emerge from this crisis with the minimum possible damage”.

Unison general secretary Dave Prentis said workers would feel “hugely reassured” and Adam Marshall, director general of the British Chambers of Commerce, said the measures provided “desperately-needed breathing room” for businesses.

But there were also warnings that the government should not stop there.

Mike Clancy, general secretary of Prospect, said the measures were “far from the ‘whatever it takes’ approach the chancellor promised”, adding: “This is too late for many of our members from flight engineers to cinema staff who have already been let go.

“The chancellor must make it clear that these workers should be rehired with their incomes secured by government for the duration of the crisis.

“There is still no real protection for freelance, self-employed and contract workers who seem not to be covered by the income protection scheme and are being left to struggle through the inadequate benefits system.”

Federation of Small Businesses chairman Mike Cherry said: “It’s critical that the cash grants being made available to those in the retail, hospitality and leisure sectors reach them as swiftly as possible.”

But while there was much-needed help for those who are traditionally employed, the government’s proposals were described as “falling far short” of the lifeline needed by freelance and self-employed workers.

Head of Bectu, Philippa Childs, said those workers needed “much more” support than was promised during No 10’s press conference.

She said in a statement: “The Chancellor’s support package for workers will come as a devastating blow to freelance and self-employed workers who needed much more support than they are being given.

“These workers are looking to the Chancellor in desperation for a vital lifeline and he has badly let them down, despite his grand promise to do ‘whatever it takes’.

“It is clear the Chancellor simply doesn’t understand the hardship these workers are in – telling them to simply claim universal credit while other workers have their incomes protected is cruel and unfair.”

During the briefing on Friday, Mr Sunak also announced that the universal credit standard allowance will also 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.

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.

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