Monday 14 June 2021 2:39 pm

Rishi Sunak not expected to alter furlough scheme despite Freedom Day delay

Chancellor Rishi Sunak is not expected to alter or extend the wage subsidy furlough programme, despite the end date of lockdown being moved beyond 21 June, according to reports.

Prime Minister Boris Johnson is set to announce later today a four-week delay to the next reduction in lockdown rules, which will maintain indoor hospitality capacity limits and work-from-home advice.

From 1 July employers will have to contribute 10 per cent of a furloughed employee’s wages, while the taxpayer picks up the other 70 per cent.

Business groups had hoped any delay in the resumption to regular trading would come with an extension of the furlough programme or a tweaking of the tapering date from which employers are asked to contribute more to their staff salaries.

However, the now Times reports the Treasury has rebuffed that idea.

A Treasury source told the Times that the scheme was already “one of the most generous in the world” and that the timetable for gradually winding down the scheme would remain the same.

Nigel Morris, employment tax director at MHA MacIntyre Hudson, said a refusal to adapt the timetable for phasing out the furlough scheme will be self-defeating:

“The chancellor ought to adapt the wind-down of the furlough scheme in light of the delay to Freedom Day in order to save jobs and livelihoods. This is especially true in sectors such as hospitality and tourism which were waiting on 21 June to fully reopen their doors again. Unfortunately current reports suggest the Treasury is resistant to any change of plan.

He said Sunak doesn’t need to change the end date of the furlough scheme, but should keep the rate of Government contributions at 80 per cent at this time.“

“Keeping government contributions at 80 per cent throughout July – instead of going ahead with the proposed reduction to 70 per cent support for businesses with a ‘mandatory’ 10 per cent employer contribution – would be an enormous help given the delay to Freedom Day. Instead, the reduction to 70 per cent government support should now start in August and the further 60% should begin in September.”

A Treasury spokesperson said this afternoon: “The furlough scheme is in place until September – we deliberately went long with our support to provide certainty to people and businesses over the summer.

“The number of people on the furlough scheme has already fallen to the lowest level this year with more than a million coming off the scheme in March and April – showing our Plan for Jobs is working.

“Businesses can also continue to access other support including business rates cuts, VAT cuts, and our Recovery Loan scheme.”

Roger Barker, the Institute of Director;s director of policy said:

“Clearly this is a blow for many businesses, particularly those in the retail and hospitality sectors.

“We are now approaching a cliff edge, with government support for business ending or beginning to taper off. It is vital that this support is pushed out commensurately with the lockdown extension.  Economic support and public health measures must be aligned.”