Chancellor Rishi Sunak allays fears over future of furlough scheme - for now

80 per cent wages will continue – but soon employers will have to chip in

Rishi Sunak says there will be more flexibility in the furlough scheme from August

CHANCELLOR Rushi Sunak has allayed the fears of many businesses and employees - at least for now - by extending the Government’s furlough scheme for another four months.

There had been speculation the job retention scheme could be wound down or the current arrangement - where 80 per cent of workers’ wages, up to a maximum of £2,500 a month, are paid by the state - could be cut back to 60 per cent.

But Mr Sunak announced it would continue unchanged until July. Then from August until October there would be more flexibility with staff able to return to work part-time, helping manufacturers who were asking for staggered shifts to reopen production lines.

And while workers will still receive 80 per cent of their wages, from August the employers will have to pay part of it.

The Chancellor did not say how big the employers’ contribution would be but promised more detail by the end of the month.

Across the UK, more than seven million workers are on the furlough scheme, which allows them to be kept on by their employers during the lockdown although not working. It is estimated to be costing the Government around £14 billion a month.

Businesses and unions in Scotland welcomed the extension of the scheme but called for more details on flexible working.

But there were warnings some businesses in the hospitality sector would need full support to continue longer because they might still not be reopening by August.

UK Hospitality chief executive Kate Nicholls said: “The full 80 per cent may need to be extended past July for some businesses in sectors like hospitality that will still operate at much reduced levels of trade, or not yet be able to open.

“Our businesses will need as much warning as possible if they are to be expected to plan ahead for eventual venue reopenings.”

Marc Crothall, chief executive of the Scottish Tourism Alliance, said the extension of furlough until the end of October would offer comfort to many within the tourism industry and he welcomed the extra flexibility.

But he warned the seasonality of Scotland’s tourism industry meant the comfort would not extend to all.

He said: “There are a great many businesses that will not survive beyond October as it will simply not be viable for them to start trading again until the spring. Sadly, the extension to furlough alone will not be sufficient to stop many businesses from making redundancies.”

Andrew McRae, Scotland policy chairman at the Federation of Small Businesses, said: “The shrewd decisions from the Chancellor will give thousands of large and small Scottish employers the right sort of flexibility.

“The move to allow operators to partially furlough their staff while they consider how to get back up to speed should mean more businesses have the right tools at their disposal.

“In the coming weeks, smaller firms will want to understand the next steps for the scheme. Policymakers will need to carefully consider how to co-ordinate financial support for businesses with advice to firms about how and when to reopen safely.”

Roz Foyer, general secretary of the STUC, said the extension of the furlough scheme was “absolutely vital” but the detail would be all-important.

She said: “Being able to use the scheme to support phased return to work through reduced hours is also an important step.

“However, we have seen some major companies announcing redundancies over recent days. There must be nothing in the amended scheme that exacerbates this problem, which is causing misery for thousands of workers.

“There are still millions of workers who have not been helped by the scheme to date and they will be in increasingly dire straits. We renew our call to the Chancellor to close the loopholes in the scheme.”

One group pressing for a change in the rules is the estimated 1.5 million people across the UK who have started jobs after February 28, the initial cut-off date for the furlough scheme. Despite having contractual proof of employment, their employers are unable to furlough them and many have now gone two months with no income.

Becky Kells, an organiser with campaign group New Starter Justice, said: “We have seen some very desperate situations among our members from two months without income. Imagine what those situations will look like in October if we don’t receive support. We are taxpayers with proof of employment. The government needs to help us.”

Economy Secretary Fiona Hyslop also welcomed the extension, but called for more clarity on several issues.

She said: “In particular, what employers will be asked to contribute to the costs of the scheme, how any changes will relate to guidance on safer workplaces in each of the four nations, how workers in isolation will be supported and what additional support might be provided to industries, such as tourism and hospitality, facing specific difficulties. I will be raising these issues with the UK Government in the coming days.”

And Alison Thewliss, SNP finance spokeswoman at Westminster, called for a guarantee that all furloughed workers would get at least 80 per cent of their salary, even if businesses could not afford to make a contribution.

“Those businesses who cannot must not be forced to make redundancies or take on unmanageable debts,” she said.

“Crucially, the scheme must remain in place and fully funded for as long as each of the four nations of the UK require it. People in Scotland, Wales or Northern Ireland must not be penalised if changes to the lockdown are made at a different pace.

“The Chancellor must also extend the scheme to those who are not currently covered – including thousands of seasonal workers and the recently employed.”

The Government said it would continue to monitor the situation but Mr Sunak made clear it was unlikely the furlough scheme would be extended beyond October

He told the Commons: “We will keep everything under review but my expectation is by then [November] the scheme should end. We’ve stretched and strained to be as generous as possible to businesses and workers, which is why we have made the decision that we’ve made today.”

The Chancellor added: “But this scheme is expensive. It’s the right thing to do. The cost of not acting would have been far higher but it’s not something that can continue indefinitely into the future. Eight months of total support is a considerable amount of time.”