Sunak ready to wind down £15bn furlough
EMPLOYERS face being asked to contribute 20 per cent towards the wages of furloughed staff and keep paying into their pension pots from August.
Chancellor Rishi Sunak is finalising changes to the job retention scheme that has cost £15billion so far and could announce reforms as soon as today.
He is reportedly planning to announce a cut-off date that will soon stop companies adding more staff to the scheme.
As well as paying one fifth of their employee pay bill, firms are also likely to be told to cover National Insurance and pension employer contributions.
Mr Sunak wants employers to start sharing the costs of the scheme, which is being used to support 8.4 million workers, before it ends in October.
The job retention scheme has proved a lifeline to around one million businesses after they were ordered to shut down in March. But as lockdown restrictions are eased, the Government will phase out the costly support.
The Office for Budget Responsibility estimates the cost of coronavirus, including the bill for the furlough scheme, will leave the UK with its highest peacetime deficit.
Under the furlough scheme, the Government pays 80 per cent of the salaries of workers whose jobs have been put on hold because of the Government shutdown.
It has allowed employers to keep staff on the payroll ready to return once lockdown restrictions are eased.
Despite the scheme being extended, bosses warn that making them cover some of the costs will lead to redundancies.
Mr Sunak put employers on notice that changes would be made to the scheme earlier this month and said he would set out the details before June.
The Chancellor insisted there would be “no cliff-edge” but warned that potentially spending as much on the furlough scheme as the total bill for the NHS was “not a sustainable situation”.
He also opened it up to parttime workers, to allow employers to phase the return of their staff.
A cross-party group of 113 MPs has written to Mr Sunak warning many self-employed workers will not be able to start earning again despite the lockdown restrictions being eased.
HMRC has received 2.3 million claims totalling £6.8billion so far for grants, but the Government is unlikely to extend the aid to October in the same way as support for PAYE staff.
The MPs wrote: “We are calling on you to ensure that this scheme is continued.”
Under the Self-Employment Income Support Scheme, grants worth up to 80 per cent of average trading profits are paid to those unable to work because of the lockdown.
Siobhain McDonagh, the Labour MP who organised the letter, asked: “How can it be right for the furloughed scheme to continue but this scheme to not?”