Friday 11 September 2020 4:16 pm

Sajid Javid backs plan to end furlough scheme in October

Former chancellor Sajid Javid today offered his support for ending the furlough scheme next month, claiming any extension would be “unfair” on taxpayers.

Speaking at the Centre for Policy Studies think tank talk about the post-pandemic economic recovery ahead, Javid said he agreed with chancellor Rishi Sunak that the furlough scheme must end.

“Even if you continue with it, it is not fair on those receiving money as you give them false hope when they might not have a job to come back to,” he said. “It is not fair on the taxpayer.”

Javid’s intervention came after the powerful Treasury Committee of MPs told Sunak to “carefully consider” a targeted extension of the furlough scheme.

It warned that the current chancellor’s scheme to replace the furlough programme – the job retention bonus – will waste money.

The bonus scheme will pay firms £1,000 for every employee they bring back from furlough.

But the Committee said that “most of the funds will be spent on workers who would be retained anyway”.

Opposition parties, trade unions and think tanks have also called for the extension of the furlough scheme in some form.

They have warned that hundreds of thousands of jobs are at risk in sectors like hospitality and retail.

For example, The National Institute of Economic and Social Research (NIESR) has said furlough should run until June 2021.

Its deputy director Garry Young said ending the scheme was “a mistake”.

Bank of England backs ending furlough

But Sunak and his predecessor Javid have received powerful back-up from the Bank of England.

The Bank’s chief economist Andy Haldane told City A.M. that continuing the furlough scheme would prevent a “necessary process of adjustment” taking place.

BoE governor Andrew Bailey said earlier this month that the scheme should end. “The labour market’s changed and the nature of Covid has changed,” he said.

He added that these changes required “a sort of change in nature of thinking about what the right policies are”.

Official figures today showed that the UK economy grew by 6.6 per cent in July, setting the stage for solid growth in the third quarter.

Yet the growth was from a low base and GDP remained 11.7 per cent below its level in February.

Data out next week will reveal unemployment levels in July. Analysts think it will only have risen to 4.1 per cent from 3.9 per cent, with the numbers kept down by the furlough scheme.