Furlough scheme to be wound down
THE Government is to begin winding down the furlough scheme which was designed to save jobs during the coronavirus lockdown, Chancellor Rishi Sunak confirmed.
At the moment, the Treasury pays the wages of 8.4 million workers who might otherwise have lost their jobs. But employers will be told to begin contributing from August, with their share of the costs rising in September and again in October.
It means the payments received by people who are furloughed stay the same – but it could also mean some simply lose their jobs.
Ministers argue that many have been saved because of the unprecedented help the Treasury has provided so far – and the furlough scheme, which has cost £15bn so far, cannot continue forever.
Speaking at the daily Downing Street press conference, Mr Sunak said: “As we re-open the economy, there is broad consensus across the political and economic spectrum the furlough scheme cannot continue indefinitely.”
And he said: “I have decided to ask employers to pay only a modest contribution, introduced slowly over the coming months.”
One million employers nationwide currently benefit from the furlough scheme, which allows them to retain employees without paying their wages. Instead, the Treasury pays up to 80% of the usual wage, capped at £2,500 a month. Firms are free to top this up, but they don’t have to.
Under changes announced by the Chancellor, firms will have to pay Employer National Insurance costs and pension contributions from August. This represents around 5% of the total cost of employing somebody normally.
From September, the Government will also reduce its contribution to wages to 70%, with a cap of £2,190. Employers will have to pay the remaining 10%.
And from October, the Government contribution to wages will fall to 60%, capped at £1,875. It means the contribution from employers will increase.
Firms will still need to ensure furloughed staff receive 80% of their normal pay, up to £2,500 a month.
It means the cost to them will increase as time goes by. The Treasury accepts some firms will simply make staff redundant instead, and says it has always been clear that the pandemic and lockdown will cause damage to the economy.
As previously announced, the scheme will come to an end entirely in November, after running for eight months.
In a move that will be welcomed by employers, Mr Sunak also said the rules will change from July 1, so businesses can bring furloughed employees back part time. Employers will be responsible for paying their wages while in work.
He also announced that a separate scheme to help self-employed people will be extended, with those eligible able to claim a second and final grant in August covering three months’ worth of profits, capped at £6,570.
Mr Sunak said: “Our top priority has always been to support people, protect jobs and businesses through this crisis. The furlough and selfemployment schemes have been a lifeline for millions of people and businesses.
“We stood behind Britain’s businesses and workers as we came into this crisis and we stand behind them as we come through the other side.
“Now, as we begin to re-open our country and kickstart our economy, these schemes will adjust to ensure those who are able to work can do so, while remaining among the most generous in the world.”