Tuesday 12 May 2020 2:39 pm

Job retention scheme: Rishi Sunak extends furlough scheme until October

Chancellor Rishi Sunak has extended the government’s coronavirus job retention scheme until October and has promised furloughed workers they will not see a further dip in their salary until it ends.

Sunak announced today that the scheme will remain the same until the end of July, but from August to October there will be “greater flexibility”, including allowing part-time workers on the scheme and making employers contribute towards some of it.

Read more: Furlough: When will the job retention scheme end and will it be extended?

The chancellor said details on what this flexibility will look like will be revealed later this month. However, it is understood the government will still pay at least 50 per cent of wages through the scheme after July.

Government will ask firms to part-pay wages

It is also understood that all businesses will be asked to pay some of the furlough scheme from July, even if they haven’t opened yet.

“Employers will be able to bring furloughed employees back part time. We will ask employers to share the costs of paying people’s salaries,” Sunak said.

“Workers will, through the combined efforts of government and employers, continue to receive the same level of overall support as they do now at 80 per cent of their current salary up to £2,500 a month.”

The scheme became operational at the end of last month, with HM Revenue and Customs creating a brand new online portal for the emergency package.

Its original version saw the government paying 80 per cent of wages, up to £2,500 a month, to furloughed employees.

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A total of 7.5m jobs from more than 1m businesses are being paid through the scheme, with £10bn so far paid out.

The Office of Budget Responsibility (OBR) estimates the scheme will cost £40bn for every three months it runs.

Responding to the scheme’s extension, Institute of Directors (IoD) policy director Edwin Morgan said: “We’re delighted the Treasury has taken on the IoD’s consistent calls for a flexible furlough.

“Many firms will be operating far below normal capacity for the foreseeable future. A part-time furlough provides a much-needed launch ramp so businesses can start to get back up to speed.”

BCC: Job retention scheme extension ‘huge relief’

British Chambers of Commerce director general Adam Marshall added: “The extension of the job retention scheme will come as a huge help and a huge relief for businesses across the UK.

“Further support may yet be needed for companies who are unable to operate for an extended period, or those who face reduced capacity or demand due to ongoing restrictions.”

“People up and down this country believe in the dignity of their work – going to work, providing for their families,” Sunak added.

“It is not their fault their business has been forced to close, it is not their fault they’ve been asked to stay at home.

“I’ve already been talking to the Trades Union Congress (TUC) and CBI particularly about the future of helping those get back into work who may lose their jobs in this period.”

Labour: How many furloughed workers will have jobs?

Labour shadow chancellor Anneliese Dodds welcomed the extension. But she asked Sunak for more details on how people who have lost their jobs during the coronavirus crisis will be able to get back to work.

Mel Stride, chair of the Treasury Committee, welcomed the extension of the furlough scheme.

“The devil though will be in the detail, which will be set out later this month when the Treasury Committee looks forward to carefully scrutinising these changes,” he added.

“The chancellor also said that there will be no changes to the scheme until July. This will be worrying for those who continue to fall through the gaps of the government’s support measures, such as the lack of furlough support to help cover dividend income generated through self-employment.”

FSB welcomes part-time furlough

The Federation of Small Businesses (FSB) said the job retention scheme’s part-time provision will protect thousands. But it also echoed Stride’s concern and called on the government to “look very closely at additional hardship funds”.

FSB national chairman Mike Cherry added: “Many have benefited from the hugely ambitious income support scheme that was established for them – some have not – but they will all need additional help from this government over the coming months. 

“We await further detail on the contributions that will be required of small employers after July. We need to ensure that those obligations are affordable for the many businesses that have had no revenue coming in for months now, but still have fixed overheads to worry about.”

Mervyn King – extend scheme indefinitely

The chancellor’s statement comes after former Bank of England governor Lord Mervyn King today said Sunak should extend the scheme indefinitely.

Read more: Former BoE governor says extend furlough scheme indefinitely

He told BBC Radio 4 that it should only end when the UK’s GDP returns to pre-lockdown levels.

“Keep it 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,” King said.

Read more: Extend job retention scheme or risk ‘second wave’ of unemployment, says think tank

“These payments under economic schemes are transferred 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 giving to the real level of long-term interest rates.

“The real cost of this shutdown is not measured on the impact of public finances, but by the lost incomes and output in the economy.”

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