Endless lockdown fear as furlough extended
Rishi Sunak announces up to £30bn of extra support for businesses to last until the end of March
‘It is hard to conclude that the process of returning economic policy to full lockdown mode via a two-month, five-stage U-turn is anything other than sub-optimal’
RISHI SUNAK has reignited fears that the UK could be heading for “neverending” lockdowns as he yesterday announced up to £30 billion of additional support for businesses until March.
In his fourth economic statement in recent weeks, the Chancellor confirmed that the furlough scheme would remain for a further four months after the second lockdown is due to end.
Anyone made redundant after Sept 23 can now be rehired and placed on furlough, with the number of people enrolling on the scheme expected to more than double to 5.5 million this month. A Daily Telegraph analysis, which assumes a gradual return to work through to March, places the total cost of the extension at £25.8 billion.
Just three days after boosting cash grants for the self-employed, Mr Sunak also raised the generosity of the payments from 55 per cent of average monthly profits to 80 per cent, capped at £7,500. The Treasury estimates this will cost an extra £2.8 billion over the three-month instalment, taking that total to £7.3 billion. An extra £2 billion in upfront funding for Scotland, Wales and Northern Ireland has been released.
It came as the Bank of England yesterday forecast that the economy would shrink by 2 per cent between October and December and announced it would expand its quantitative easing programme by £150 billion.
The l ess generous j ob support scheme, due to replace furlough, has now been postponed, as has the £1,000 job retention bonus due to be claimed by firms in January. The latest package marks a major about-turn by Mr Sunak, who only two months ago insisted it would be wrong to “endlessly extend furlough”. However, allies of the Chancellor last night strongly denied claims he had been forced into changing course by Boris Johnson. One source insisted Mr Sunak had been modelling options throughout the week, adding that suggestions of a rift between No 10 and No 11 were “categorically untrue”.
Separately, the Prime Minister’s spokesman scotched suggestions that the support was designed partly to insulate firms after the Brexit transition period ends.
Last night Mr Johnson said he had “every confidence” that the lockdown would be lifted after Dec 2, adding that he had “no doubt people will be able to have as normal a Christmas as possible”.
But the length of the furlough extension has reignited fears among Conservative MPS that ministers are preparing for the possibility of rolling lockdowns into the spring.
Last night Sir Graham Brady, chairman of the 1922 Committee of backbench Tory MPS, told The Telegraph: “We need to be extremely careful to ensure that the provision of furlough money until March does not pave the way for a never-ending lockdown.”
The decision to increase the selfemployed grants prompted a backlash among economists, with Paul Johnson of the Institute of Fiscal Studies describing it as “wasteful and badly targeted”.
Torsten Bell, the chief executive of the Resolution Foundation think tank, added: “The extension of the furlough scheme will help to protect millions of workers’ incomes in the tough months ahead. Sadly the same cannot be said for the self-employed. Support for firms and workers through a difficult winter is welcome, but it is hard to conclude that the messy process of returning economic policy to full lockdown mode via a two-month, five-stage U-turn is anything other than deeply sub-optimal.”
In his update to MPS yesterday, Mr Sunak insisted the latest cash injection was necessary to shield the economy from the “trauma” that would otherwise result from the plunge back into lockdown.