Rishi Sunak extends furlough scheme to OCTOBER

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Rishi Sunak today extended the government’s massive coronavirus bailout to October despite fears about the spiralling cost.

The Chancellor said the multi-billion pound subsidy, which had been due to end next month, will stay in place for four more months, and it will still cover 80 per cent of wages up to a ceiling of £2,500 a month.

With concerns the scheme is costing £14billion a month – roughly equivalent to the NHS budget – Mr Sunak also told the Commons that from August workers on it will be able to go back part-time. 

Firms will have to cover a proportion of wages from that point, he said. 

‘Nobody who is on the furlough scheme wants to be on this scheme. People up and down this country believe in the dignity of their work, going to work, providing for their families, it’s not their fault their business has been asked to close or asked to stay at home,’ Mr Sunak said. 

The announcement came despite mounting speculation that the proportion of pay would be cut to 60 per cent from July, as ministers urge people to return to work and loosen the lockdown strangling the economy.

Unveiling the move on his 40th birthday, Mr Sunak told MPs that the job retention scheme had protected 7.5million workers and almost a million businesses. 

‘Until the end of July there will be no changes whatsoever,’ he said.

‘Then from August to October, the scheme will continue for all sectors and regions of the UK but with greater flexibility to support the transition back to work.

‘Employers currently using the scheme will be able to bring furloughed employees back part-time.

‘And we we will ask employers to start sharing with the Government the cost of paying people’s salaries.

‘Full details will follow by the end of May.’  

The Treasury has been looking at ways to cut back the scheme that is paying up to 80 per cent of wages, up to a maximum of £2,500 per month. 

But Mr Sunak previously vowed there will be no ‘cliff edge’ to the support, but admitted the scale of the bailouts are not ‘sustainable’.  

TUC General Secretary Frances O’Grady said: ‘We are pleased ministers have listened to unions and extended the job retention scheme to the autumn. This will be a big relief for millions.

‘Changing the rules to allow part-time working is key to enabling a gradual and safe return to work. And maintaining the rate at 80 per cent is a win for the pay packets of working families.

‘As the economic consequences of Covid-19 become clear, unions will keep pushing for a job guarantee scheme to make sure everyone has a decent job.’

Shadow chancellor Anneliese Dodds seemed taken aback by the step, saying she had only heard about the Chancellor’s changes ‘in the last few seconds’ and will examine them ‘very, very carefully’.

Ms Dodds said people do not want to be furloughed, adding in the Commons: ‘It’s critically important they are not penalised for that choice. We welcome the flexibility mentioned, we’ve asked for this repeatedly.’

She said many had been angered by comments attributed to Government officials suggesting people need to be ‘weaned off an addiction’ to the furlough scheme. 

Torsten Bell, Chief Executive at the Resolution Foundation, said: ‘The Job Retention Scheme has been an essential lifeline for millions of families and hundreds of thousands of firms.

‘The Chancellor is right to reject calls to swiftly end it and instead opt for a package of measures to extend and reform it. Moving too quickly could spark a huge second surge in job losses at a time when unemployment already looks set to be at the highest level for a quarter of a century.’

Earlier, former Bank of England governor Lord King warned that the scaling down of the furlough arrangements should be linked to the state of the economy, not any particular timeframe.

‘The furlough scheme ought to be linked to the performance of the economy and not to a particular calendar timetable,’ he told BBC Radio 4’s Today programme.  

He said the proportion of wages covered should stay at 80 per cent.

‘I don’t think it makes sense to regard this as the major cost of the Covid-19 crisis in economic terms,’ he said.

‘These payments under Government schemes are transfers from taxpayers in general to businesses, it will lead to an increase in national debt (but) we can finance that over a long period, particularly given the very low level of long-term real interest rates.

‘The real cost of this shutdown is not measured by the impact on the public finances but by the lost incomes and outputs in the economy, a cost which is likely to end up as an order of magnitude (though no one can really know this) of several hundred billion pounds. That’s an enormous cost.’ 

Boris Johnson’s roadmap for releasing the lockdown, published yesterday, suggested that hospitality businesses and others like hairdressers and gyms, face being closed until July at the earliest. 

Taking questions from MPs, Mr Johnson said: ‘I do think that the furloughing scheme has been one of the most remarkable features of the Government’s response and it is unlike anything seen internationally.

‘Six-and-a-half million people currently are being supported. It is absolutely right that we should do it.

‘I don’t want to anticipate what (Mr Sunak) is going to say but the House will hear more about that tomorrow.’

The current version of the scheme was due to expire at the end of June, with firms able to claim 80 per cent of a furloughed worker’s wages up to a monthly cap of £2,500. 

 First announced in March, the move was opened for three months, backdated from March 1 to the end of May, and was later extended by a month until the end of June.

Deputy Labour leader Angela Rayner told Today the furlough cover should continue ‘as long as we need it’.

Ms Rayner added: ‘We can’t afford not to do it correctly. I think it is really important the Chancellor continues with the good practice of making sure that furlough scheme is in place and doesn’t try and reduce it too soon, because that will cost us in the longer term.

‘Many families wouldn’t be able to survive right now if it wasn’t for things like the furlough scheme, it is absolutely right the Government has stepped in but they can’t now pull the rug from underneath people’s feet – they have to continue to support people throughout this crisis.

‘We will have to look at how the economy recovers, but it is not going to recover quickly enough if we pull the rug from people now and people end up destitute and we end up having that R rate spiking again and back in lockdown.’ 

Asked about the continuation of the furlough scheme, Health Secretary Matt Hancock told Sky News: ‘We have said that shouldn’t be a cliff-edge in the furlough scheme, but at the same time, we do need to try to get the economy back to something more like normal.’