Rishi Sunak has moved to assure people that “there will be no cliff edge” to the government’s job retention scheme, signalling that it could be extended past June for some workers.
Sunak last night said he was “working to figure out the most effective way to wind down the scheme”, which is paying the wages of 6.3m furloughed Britons.
The scheme sees the government pay 80 per cent of wages, up to £2,500 a month, to furloughed workers between April and June.
The Office of Budget Responsibility (OBR) estimates it will cost more than £40bn over its original three-month time period.
Labour and other business groups have urged the chancellor to extend or amend the scheme as fears mount that its end could cause mass redundancies.
Speaking to ITV last night, Sunak assured people this would not happen.
“To anyone who is anxious about this, I want to give them reassurance that there will be no cliff edge to the furlough scheme,” he said.
“I’m working as we speak to figure out the most effective way to wind down the scheme and ease people back to work in a measured way.”
However, Sunak also warned that it was not sustainable to continue the scheme indefinitely as the costs pile up.
Analysis from The Daily Telegraph found that half of the UK’s adults were now on the government payroll.
This includes the 6.3m people on the job retention scheme, 3m people now claiming unemployment benefits, 5.4m public sector workers and 12.6m people receiving a state pension.
If the furlough scheme was run for 12 months it would cost an estimated £160bn – almost as much as the NHS budget for one year.
“We are potentially spending as much on the furlough scheme as we do on the NHS for example,” Sunak said.
“Clearly that is not a sustainable situation, which is why as soon as the time is right we want to get people back to work, get the economy fired up again.”
Sunak’s assurances come as Labour shadow business secretary Ed Miliband called called for a “second wave” of government support to aid the coronavirus recovery.
Speaking to MPs yesterday, Miliband said: “There will need to be a second wave of financial support for those businesses closed longer, including an extension of the furlough scheme with more flexibility for part-time working.”