Furlough scheme to be extended to end of October, Rishi Sunak confirms

Chancellor says scheme will be made more flexible to allow part-time return to work over summer

The furlough scheme to support workers through the coronavirus crisis is being extended to the end of October, but employers will be asked to bear a share of the cost of paying staff up to 80 per cent of wages while they are not working, chancellor Rishi Sunak has told the House of Commons.

Mr Sunak said that additional flexibility will be built into the scheme to allow a part-time return to work over the summer, but the Treasury is not planning to reveal precise details of how this will work and how much employers will have to pay until the end of May.

It raises the prospect that businesses like pubs and nightclubs could be told to contribute towards staff salaries despite being barred by the government from opening for business.

Labour demanded immediate clarity on the cost to employers, warning of the danger of mass redundancies at the start of August if they are suddenly required to pay substantial sums to keep on workers who they would otherwise have been laid off during the lockdown.

Mr Sunak said that the job-retention scheme had been a “world-leading economic intervention”, supporting 7.5 million jobs in almost 1 million businesses with payments totalling £10bn so far.

The scheme had been due to be wound down after four months in operation at the end of June, and today’s announcement means employers will not be forced this week to send out mass redundancy notices for that date.

Treasury sources declined to put an estimate on the cost of extending the scheme by a further four months. But the Institute for Fiscal Studies think tank said that it brought the total outlay up to £60bn by the end of July, with further costs beyond that date dependent on the exact design of the scheme in the following three months.

Mr Sunak told the House of Commons the scheme will continue unchanged to the end of July, adding: “Then from August to October, the scheme will continue for all sectors and regions of the UK, with greater flexibility to support the transition back to work.

“Employers currently using the scheme will be able to bring furloughed employees back part time. And we will ask employers to start sharing with the government the cost of paying people’s salaries.

“Full details will follow by the end of May, but I want to assure people today of one thing that won’t change – workers will, through the combined efforts of government and employers, continue to receive the same level of overall support as they do now, at 80 per cent of their current salary up to £2,500 a month.”

Mr Sunak’s announcement was welcomed as “a huge relief for businesses across the UK” by the British Chambers of Commerce, while the Institute of Directors (IoD) said a part-time furlough will provide “a much-needed launch ramp so businesses can start to get back up to speed”.

The Chartered Institute of Personnel and Development said the job retention scheme had prevented as many as 4 million redundancies and allowing it to lapse at the end of June would have made it no more than a “waiting room for unemployment”.

But IoD director of policy Edwin Morgan said: “We now need further clarity around employers’ contributions. Many firms that would normally be on strong footing are still in dire straits.

“The extension puts yet more onus on helping those who have been left out in the cold. Countless small-company directors have found scant support, and government shouldn’t turn a blind eye to them.”

Shadow chancellor Anneliese ​Dodds said Mr Sunak was right not to pull away the furlough scheme, which was “a lifeline for millions”.

But she warned: “The government must clarify today when employers will be required to start making contributions, and how much they’ll be asked to pay. If every business is suddenly required to make a substantial contribution from 1 August onwards, there is a very real risk that we will see mass redundancies.”

TUC general secretary Frances O’Grady said the extension of furlough would be “a big relief for millions” and maintaining payments at 80 per cent – rather than cutting them to 60 per cent, as many had expected – was “a win for the pay packets of working families”.

She added: “As the economic consequences of Covid-19 become clear, unions will keep pushing for a job-guarantee scheme to make sure everyone has a decent job.”