RISHI: WE’RE ALREADY IN RECESSION

Chancellor’s grim warning as he extends the furlough scheme again

Rishi sunak extended the coronavirus job subsidy scheme until the end of October as he conceded yesterday that the UK is already in recession.

in a fresh sign that ministers believe Britain faces a long haul to economic recovery, the Chancellor said it was already clear that the furlough scheme would have to go well beyond its current deadline of the end of June.

Mr sunak disclosed that the scheme, which sees the taxpayer subsidise 80 per cent of wages up to a maximum of £2,500 a month, is already supporting 7.5million jobs.

he told MPs the scheme would continue ‘completely unchanged’ until the end of July – despite warnings it could cost taxpayers more than £80billion.

After that, people who have been furloughed will continue to receive 80 per cent of their wages, but their employer will be asked to make a contribution towards the cost. The scheme will also be tweaked to allow furloughed staff to start returning to work part-time from as little as one day a week – an idea that has been a key demand of business.

The extension was welcomed by both unions and business last night. The scheme has been accessed by 935,000 businesses since March and has already cost £10billion.

Andrew McRae, scotland policy chairman for the Federation of small Businesses, said: ‘Today’s shrewd decisions from the Chancellor will give thousands of large and small scottish employers the right sort of flexibility.’

Tracy Black, director of CBi scotland, said: ‘The Chancellor is confronting a challenging balancing act deftly. As economic activity slowly speeds up, it’s essential that support schemes adapt in parallel.’

The move came as ministers braced themselves for official GDP figures which are expected to show the economy went into reverse in the first three months of this year.

The job retention scheme is credited with shoring up millions of jobs that would otherwise have gone as the Government ordered the closure of huge swathes of the economy.

Despite this, some 1.8million people have signed up for Universal Credit since the lockdown began.

Asked whether the country faced an inevitable recession, Mr sunak told the BBC: ‘We already know that many people have lost their jobs and it breaks my heart. We’ve seen what’s happening with Universal Credit claims already. This is not something that we’re going to wait to see, it’s already happening.

‘There are already people who have lost their jobs. That’s why i’m working night and day to limit the amount of job losses.’

The Treasury declined to say how much the scheme was now likely to cost. But Capital Economics predicted it could be £87billion, while the institute for Fiscal studies said it could cost almost £100billion.

Mr sunak suggested it was costing about £8billion a month. From today, the self-employed will be able to apply for income support dating back to March.

Len McCluskey, general secretary of the Unite union, welcomed the extension, while the British Chambers of Commerce said it was a ‘huge help and a huge relief for businesses across the UK’.

sNP economy spokesman Alison Thewliss ‘cautiously’ welcomed the announcement and called for the scheme to remain for as long as required by the four UK nations.

MILLIONS of workers and their employers will have breathed a sigh of relief yesterday, as Chancellor Rishi Sunak announced a four-month extension of the Government’s furlough scheme.

The financial lifeline will allow companies to rebuild as Britain moves out of lockdown, without immediately having to foot the full wage bill, and should mean many fewer redundancies. For employees, it guarantees 80 per cent of their salary until October.

At such a critical time, this is a humane and understandable policy. But it comes at an eye-watering price.

It is estimated the total cost to the taxpayer could creep towards £100billion. This is twice the annual amount spent on schools. It is also money we’ll have to borrow – with interest.

So yes, it’s desirable that business has a soft landing from the Covid shock. But it must be weaned off this state subsidy as soon as possible. It’s a luxury Britain cannot afford for long. Indeed, with the economy in freefall, we can barely afford it now.