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 workers 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.

“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 during the prime minister’s press conference.

The measures to strengthen the welfare system will benefit more than four million of the most vulnerable households, he said.

“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 that 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 ordered pubs, gyms, cafes and restaurants across the country to close.

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.

“The economy is having a cardiac arrest – I’m seeing it happen in a way that I never witnessed during the financial crisis – it is a dramatic moment in this country.”

The prime minister also said on Friday that nightclubs, theatres, gyms and leisure centres should close to slow the spread of coronavirus, which has infected nearly 250,000 worldwide.

He said the measures were needed to reduce “unnecessary” social gatherings by 75% in order to have an impact on the infection rate.

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