Government eyes extending 60% furlough scheme until September

Coronavirus Job Retention Scheme could be extended until September with government covering 60% of staff wages

UPDATED: Chancellor Rishi Sunak is set to extend the Coronavirus Job Retention Scheme furlough until September with Treasury covering 60 per cent of staff wages.

The Treasury is also weighing up adopting a part-time furlough system, so workers can work part time and have some of their wages covered by government.

Former Bank of England governor Lord Mervyn King has added to the calls for the job retention scheme to be extended, telling BBC’s Today programme that the furlough should be kept on indefinitely at the 80 per cent level and that furloughed workers should be allowed to work part-time.

The Resolution Foundation has also called for the furlough scheme to remain in place until September, even in its diluted form, costing the public purse £50bn in total.

So far, 6.3m workers have been furloughed and the Chartered Institute of Personnel and Development estimates more than 4m would have lost their jobs if not for Coronavirus Job Retention Scheme. The CJRS is costing the Treasury £8bn a month.

However, economists fear massive unemployment as businesses close or shrink due to a post Covid-19 recession and prolonged social distancing rules.

Yael Selfin, chief economist at KPMG, told the Telegraph: “We have 1.2m moving from furlough to unemployment this year, due to the structural change triggered by the crisis and the extended impact social distancing would have on a number of sectors.”

Sanjay Raja at Deutsche Bank was even gloomier, predicting that unemployment would hit 8 per cent this year – or over 5m people.

Previously, the chancellor has said there will be no “cliff edge” of businesses having furlough support suddenly switched off as they reopen. Originally, the furlough scheme was set to expire at the end of May, then July, and now, apparently, September.

Ongoing headache

How to wean businesses off the Coronavirus Job Retention Scheme, which currently costs the Treasury £8bn a month, is an ongoing headache for the Treasury. The scheme could end up costing as much over a year as the NHS. The government has been taken aback by how enthusiastically employers and staff have embraced the scheme, which currently has about 50 per cent of the population on furlough.

Organisations representing pubs and hotels, restaurants and others in hospitality, braced to be the last small business sector to reopen, have argued that the job retention scheme should be kept open for hospitality workers indefinitely. However, Mr Sunak is reportedly not keen on sector by sector exemptions.

Edwin Morgan, director of policy, told the Telegraph: “Enabling people to return to work gradually can help businesses get back on their feet. With demand still flagging across the economy, and social distancing proving a challenge for many firms, the Government needs to be agile with its support.”

Further reading

Government launches business Coronavirus Job Retention Scheme


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Tim Adler

Tim Adler is group editor of Small Business, Growth Business and Information Age. He is a former commissioning editor at the Daily Telegraph, who has written for the Financial Times, The Times and the...

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