/Furlough scheme to be wound down as costs are not a sustainable situation

Furlough scheme to be wound down as costs are not a sustainable situation

Chancellor Rushi Sunak has reassured workers that there will be no “cliff-edge” cut off to the furlough scheme, in a warning that the initiative has already cost the Treasury £8billion.

It comes as ministers revealed the Job Retentions Scheme (JRS) is now covering nearly a quarter of UK jobs – 23% of the employed workforce.

About 2.5million people registered for the scheme last week, bringing the total claims to 6.3million.

Under the initiative, the Government will fund 80% of workers’ wages, up to £2,500 a month.

A total of £8billion has been issued so far, with an average payout of £1,269 – about half of the £2,500 maximum. The scheme is due to run through June, suggesting the total cost could exceed £30billion.

However, in a television interview, Chancellor Rishi Sunak sounded a cautionary note, saying that level of expenditure was “not sustainable”.

The JRS’s cost is not ‘sustainable’ in the longer term, Sunak said
(Image: iStock Unreleased)

“I am working as we speak to figure out the most effective way to wind down the scheme and ease people back into work in a measured way,” he said.

“As some scenarios have suggested, we are potentially spending as much on the furlough scheme as we do on the [National Health Service] for example. Now clearly that is not a sustainable solution.”

People would be eased back into work in a “measured way”, he said, adding: “To anyone anxious about this, I want to reassure that there will be no cliff-edge to the furlough scheme.”

Around 2.5million workers registered for the scheme last week, which, on the current run rate, could cost the economy £30billion.

“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 and the economy fired up again.”

According to the Liberal Democrats, there should be a “tapered” end to the programme, with the Treasury paying 50% of salaries for the first month after people return to work, falling to 30% after the third month, with employers picking up the full bill after the fourth.

Pubs and restaurants say they will take the longest to bounce back from lockdown and social distancing measures
(Image: Universal Images Group via Getty Images)

Sir Ed Davey, Acting leader, said: “The Government furlough scheme has done a good job at helping thousands of businesses through the lockdown, but the shadow of lockdown will be long, and the ‘new normal’ will be extremely challenging.

“Businesses and their staff need time to plan, and confidence the Government will be there, ready to support.”

Some business groups, such as those in the hospitality sector, have urged the government to extend the scheme, over fears it could take years to recover from the crisis.

It comes after the scheme was granted a 30-day extension a fortnight ago – taking the final date to June 30, 2020.

Trade body UK Hospitality, estimates that one million hotel, pub and restaurant jobs could be lost without an extension to July.

The furlough scheme was first introduced on March 20 to help secure the pay of thousands of employees who faced redundancy or a loss of income due to the outbreak.

Under the scheme, employers can apply for HMRC to cover their workers’ wages for up to four months, placing these employees on ‘furlough’.

Workers are effectively put on paid leave – with the Government covering 80% of their monthly wage.

Employers can then top up the additional 20% at their discretion.

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