MPs have urged Rishi Sunak to "carefuly consider" an extention to the furlough scheme as well as targeted financial support to prevent job losses in the coming months.
The House of Commons Treasury Committee, which is chaired by Conservative MP Mel Stride, joined a growing chorus of voices including the Labour Party, unions and business leaders that are calling for ministers to consider additional support for jobs.
Economists have warned the UK faces a wave of joblessness that could reach levels last seen in the 1980s unless additional financial help for workers and businesses is provided.
In a critical report, the Treasury committee warned of mass unemployment if the Job Retention Scheme, which covers up to 70 per cent of the salaries of furloughed workers, is not extended beyond its current end date of 31 October, or replaced with other measures.
Mr Stride said the committee was "disappointed" that ministers had not heeded its earlier recommendaion to provide assistance to more than a million people unfairly excluded from government support measures.
The MPs also warned that a VAT cut for hospitality and leisure businesses may not be enough to persuade people to soend money in pubs and restaurants.
The chancellor needs to consider whether additional measures to stimulate consumption are warranted at the next Budget, the MPs wrote in their report.
Mr Sunak should also look at increasing Statutory Sick Pay, the MPs said, echoing a recommendation made by the TUC this week. SSP is currently just £95.85 per week, a level which the TUC said would force many workers to choose between their health and paying the bills if they were forced to self-isolate.
Mr Stride sad the committee had sought to focus on the challenges emerging after lockdown, one of which was getting assistance to people and firms who need it most.
“The Chancellor should carefully consider targeted extensions to the Coronavirus Job Retention Scheme and explain his conclusions," he said.
“The key will be assisting those businesses who, with additional support, can come through the crisis as sustainable enterprises, rather than focusing on those that will unfortunately just not be viable in the changed post-crisis economy.”
“As the committee has said throughout the crisis, the chancellor must continue to show flexibility in his approach. We hope that the Treasury’s unwillingness to implement the recommendations from our first report is not a sign of how it will respond to this one.”
The Resolution Foundation's chief executive Torsten Bell said that the Chancellor needed to reconsider plans to phase out support, and called the committee's report "essential reading for Treasury officials".
He added: "Extending support for the hardest hit sectors of the economy will be essential to limit the rise in unemployment Britain faces in the months ahead.
"The government will also need to shelve plans to cut back Universal Credit payments to prevent millions of families from suffering a fresh income shock next spring."
TUC general secretary Frances O’Grady said: "MPs from all parties are now urging the chancellor to provide support beyond October, so that businesses with a viable future don't have to lay off staff.
"The TUC has set out a new plan for a Job Retention and Upskilling scheme supporting short-time work. The Chancellor must act quickly and decisively to put a scheme in place before unemployment surges."
Mike Cherry, the chairman of the Federation of Small Businesses, said that policymakers should look closely at a potential successor to the Job Retention Scheme.
"The priority should be protecting viable small businesses - and all the jobs they provide - that have been disproportionately impacted by the coronavirus crisis, including those caught by local lockdowns, subject to continued national restrictions, or with staff that have directly suffered because of Covid."
He also called on the Government to take on board the MPs' suggestions to help company directors and the newly self-employed who have been left out of the support mechanisms so far.
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