Treasury minister Steve Barclay has ruled out extending the government’s furlough scheme past October, but left the door open for targeted relief to some sectors.
The scheme is due to end on 31 October, with government payments decreased in September and October.
Barclay said today that there would be no extension to the scheme, echoing recent comments from chancellor Rishi Sunak that it would be “irresponsible” to keep it running.
This is despite calls today from the National Institute of Economic and Social Research (NIESR) think tank to extend the furlough scheme until June 2021.
Mayor of London Sadiq Khan also called for the scheme to be extended in a letter to Prime Minister Boris Johnson on Sunday.
Barclay conceded that some “targeted measures” could be implemented for sectors not able to fully operate at the end of the year, but added that the government did not want people on leave for more than eight months.
“The rationale behind the furlough scheme was about maintaining the link with the job,” he said.
“And actually if you stretch the elastic of that too long… it is not good for them, never mind the debate on the financial side of it.”
The government has paid the wages of 9.5m people through the scheme, with total outlay at almost £32bn.
The NIESR believes that ending the scheme in October will mean a surge in unemployment that will cripple the economy.
The think tank said today that unemployment would more than double to 10 per cent, and that extending the scheme would be “relatively inexpensive”.
NIESR deputy director Garry Young said: “The planned closure of the furlough seems to be a mistake, motivated by an understandable desire to limit spending.
“The scheme was intended by thechancellor to be a bridge through the crisis and there is a risk that it is coming to an end prematurely and this increases the probability of economic scarring.”
Labour’s shadow Treasury minister Bridget Phillipson said: “Steve Barclay has admitted what everyone already knows: the one-size-fits-all Tory economic policy simply won’t match the challenges we face ahead.
“We urgently need tailored support for the sectors that need it most. It shouldn’t have taken the government months to work this out.”