Furlough scheme extended to end of October, Rishi Sunak says, but employers to share burden with government from August
Video report by ITV News Business Editor Joel Hills
The coronavirus job retention scheme, which paid furloughed staff 80% of their wages, has been extended to the end of October, but employers will share the burden with the government from August, the chancellor has said.
In an address to MPs in the Commons, Rishi Sunak promised no matter what changes after July, employees will receive the same level of support as they do now, at 80% of their salary, up to £2,500.
After July employers currently using the scheme will be able to bring furloughed employees back part-time, and the government will ask firms to "start sharing, with the government, the costs of paying people’s salaries".
There had been speculation that the scheme would be extended, but modified to just pay 60% of salaries, but the chancellor confirmed in the Commons this is not the case.
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Mr Sunak said seven-and-a-half million employees were being supported through the scheme, with nearly a million businesses also benefitting from the government's help.
At least 6.3 million people are currently having up to 80% of their salaries paid by the taxpayer under the furlough system at a cost of some £8 billion.
Mr Sunak has previously said he was preparing to “wean” workers and businesses off the programme – which currently runs until the end of June – but calls had been made for it to be prolonged.
The chancellor extended the scheme by a further four months, meaning there will have been eight months of support by the time the scheme finishes.
ITV News Political Editor Robert Peston describes the furlough scheme as "state support for work on a scale this country has never seen".
Shadow chancellor Anneliese Dodds said many were taken aback by comments attributed to Government officials suggesting people need to be “weaned off an addiction” to the furlough scheme.
She said 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.”
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Mr Sunak replied: “The use of the word ‘addiction’ is not one I have ever used and not one I agree with.
“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.
“That is why I established this scheme to support these people and their livelihoods at this critical time.”
The continuation of the furlough scheme on its current terms to the end of July will cost the taxpayer around £10 billion, the Institute for Fiscal Studies (IFS) said.
Carl Emmerson, deputy director at the IFS, said: “The Chancellor announced that the coronavirus job retention scheme would be extended in its current form for a fifth month to the end of July.
“This will increase the cost by £10 billion or so, bringing the total support provided through this scheme up to around £60 billion.
“He also announced a different scheme would be in place over the following three months to the end of October, with details of this to come later this month.”
Chancellor Rishi Sunak said that self-employed people could start to receive cash payments from the Government to make up for lost earnings from “as early as next week”.
Labour’s Meg Hillier, chairwoman of the Commons Public Accounts Committee, asked what support is being provided for the self-employed.
Mr Sunak replied: “The scheme to support them goes live tomorrow ahead of schedule.
“Those who are self-employed whose returns of earnings we are aware of… are already being contacted, they will be able to apply from tomorrow and they will receive cash in their accounts for a three-month grant from as early as next week.”
Meanwhile, ministers are to set out guidance on how people can travel safely on public transport as the coronavirus lockdown begins to ease.
The death toll from coronavirus in the UK stood at more than 32,000 as the Prime Minister said he wants those who cannot work from home to start returning to their workplaces from Wednesday.
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Mr Sunak last week warned the furlough scheme was not “sustainable” at its current rate although he promised there would be no “cliff edge” cut-off.
He also confirmed that 267,000 bounce-bank loans have been approved since he announced them.
Updating MPs on the latest figures in the Commons, Mr Sunak said: “I’m pleased to say over a quarter of a million bounce-bank loans have been approved, 267,000, with over £8 billion of capital that has benefited small and medium-sized companies up and down the UK.
“And on top of that, 35,000 CBILS loans worth over £6 billion have now been put out.”
Mr Sunak added that “hundreds of thousands of businesses” are benefiting from the loan schemes introduced by the Government.
Torsten Bell, chief executive of the Resolution Foundation think tank and an early advocate of the scheme, said it should be phased out gradually.
“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,” he said.
“This policy has made a huge difference in this crisis. It now needs careful and gradual change to ensure the benefits it has provided are secured rather than squandered.”
Meanwhile, the managing director of leisure operator GLL Mark Sesnan has suggested any tapering should be looked at on a sector-by-sector basis.
He said: “Industries such as leisure and hospitality (should be) protected.
“This is because, in order to adhere to social distancing guidelines, we will have to operate at a significantly reduced capacity.
“In turn, this will have a major impact on the number of staff able to return to work fully.”
Mr Johnson has said he does not expect a sudden “flood” of people heading back to work following Monday’s publication of the Government’s “road map” for lifting the restrictions.
But this prompted a barrage of questions as to how it could be achieved amid warnings the Government is watering down its clear “stay home” message.
Speaking at the daily No 10 press briefing on Monday, Mr Johnson said the measures – including allowing unlimited outdoor exercise – were mere “baby steps”.
He warned the Government stood ready to reimpose controls if there was any sign of the transmission rate of the virus picking up again.
The TUC, meanwhile, has welcomed the publication of Government guidance on how workplaces can be made “Covid-secure” as they re-open.
Employers – including factories and construction sites – will be required to carry out a risk assessment before they can resume.
This followed criticism by unions that Mr Johnson had issued his return-to-work call in his broadcast on Sunday without explaining how it could be safely achieved.