Coronavirus: Furlough scheme extended - and there will be no cut in support
Furloughed workers will continue to receive 80% of their salary until the end of October, Chancellor Rishi Sunak announces.
Tuesday 12 May 2020 19:03, UK
The government scheme which is supporting 7.5 million workers during the coronavirus pandemic will be extended until the end of October, the chancellor has announced.
Rishi Sunak said the furlough scheme, which pays 80% of an employee's salary up to £2,500 a month, will remain unchanged until the end of July as the COVID-19 lockdown continues.
From that point it will continue, but employers will be expected to begin footing some of the multi-billion pound bill.
Staff will still receive the current level of support, through a combination of state and employer contributions.
Addressing MPs in the Commons, the chancellor said that from August there would be greater flexibility to allow furloughed staff to start going back to work.
"Employers currently using the scheme will be able to bring furloughed employees back part-time," Mr Sunak said.
"And we will ask employers to start sharing with the government the cost of paying people's salaries."
The chancellor said further details would be set out at the end of the month.
"I'm extending the scheme because I won't give up on the people who rely on it," Mr Sunak told MPs.
"Our message today is simple: we stood behind Britain's workers and businesses as we came into this crisis, and we will stand behind them as we come through the other side."
The announcement came in response to an urgent question from Labour's shadow chancellor, Anneliese Dodds.
She said she had only heard about the chancellor's changes "in the last few seconds" and will look at them "very, very carefully".
The shadow chancellor also raised comments attributed to government officials in media reports suggesting that people had to be "weaned off an addiction" to the scheme.
Ms Dodds said people do not want to be furloughed, adding: "It's critically important they are not penalised for that choice.
"We welcome the flexibility mentioned, we've asked for this repeatedly."
The chancellor said in response that he had never used the phrase in connection with the furlough scheme and it was "not one I agree with".
"Nobody who is on the furlough scheme wants to be on this scheme," Mr Sunak continued.
"People up and down this country believe in the dignity of their work, going to work, providing for their families, it's not their fault their business has been asked to close or asked to stay at home.
"That is why I established this scheme to support these people and their livelihoods at this critical time."
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Alison Thewliss, Treasury spokeswoman for the SNP, queried whether the furlough scheme could be continued in Scotland, Wales and Northern Ireland if they keep the lockdown in force longer than England.
Boris Johnson's government has begun easing some of the lockdown restrictions in England, but the devolved nations are sticking with the original "stay at home" advice at the moment.
Mr Sunak responded: "This is now an extension for four months to the end of October which will provide eight months in total to all regions and all sectors of the United Kingdom and provides, I think, a very good and generous runway for businesses and firms to plan."
The chancellor also revealed that self-employed people could start receiving cash payments from the government to make up for lost earnings from "as early as next week".
"The scheme to support them goes live tomorrow ahead of schedule," Mr Sunak said in response to Labour MP Meg Hillier.
"Those who are self-employed whose returns of earnings we are aware of... are already being contacted, they will be able to apply from tomorrow and they will receive cash in their accounts for a three-month grant from as early as next week."
TUC general secretary Frances O'Grady said the furlough extension "will be a big relief for millions".
"Changing the rules to allow part-time working is key to enabling a gradual and safe return to work," she said.
"And maintaining the rate at 80% is a win for the pay packets of working families."
Dame Carolyn Fairbairn, director-general of the Confederation of British Industry, said businesses will want more detail.
She also called for ministers to be willing to be flexible if there is a second peak.
"Introducing much-needed flexibility is extremely welcome," Dame Carolyn said.
"It will prepare the ground for firms that are reawakening, while helping those who remain in hibernation.
"That's essential as the UK economy revives step-by-step, while supporting livelihoods."
Chancellor may be delaying much of the pain, not preventing it
Analysis by Joe Pike, political correspondent
As with the lockdown, it was always going to be easier to introduce the "Job Retention Scheme" than withdraw it.
Rishi Sunak's original intention was to freeze the UK economy, putting it in a temporary cryogenic state until the virus threat had passed, allowing companies to restart from where they left off rather than rebuilding from the ground up.
And crucially the government was desperate to avoid mass redundancies and mass unemployment.
But defrosting is difficult, and business groups have warned that many of the 7.5 million people furloughed will be laid off if the scheme ends too fast.
Today's big announcement from Mr Sunak - extending the scheme in full until the end of July, then gradually reducing it until the end of October - has been widely welcomed.
The Trades Union Congress says the government has 'listened' and the news will be 'a big relief to millions of working families'.
However that big relief comes with a big price tag. Some estimates suggest it will cost an extra £13bn just to extend the scheme until the end of July.
And we will only get the full details of how that extension will work at the end of this month.
Most importantly we still do not know what decisions firms will make ahead of August: the point they either start shouldering part of the burden or lay off staff.
The chancellor claims today's announcement provides a "generous runway to businesses to plan against", and it certainly avoids the cliff-edge so many had worried about.
Yet with the world bracing for recession, and UK consumer confidence at a record low, Mr Sunak may just be delaying much of the pain, not preventing it.