Furlough extended until May
Rishi pledges extra £5bn just hours after warning over scale of borrowing
RISHI Sunak has extended the furlough scheme until May in a fresh sign that tough Covid curbs will last well into next year.
The Chancellor had repeatedly insisted the £5billion-amonth scheme would end in October – only to prolong it until the end of March.
Now he has told MPs it will now last until the end of April to help provide ‘certainty’ for firms hit by the pandemic.
Covid business loans, which have already cost £68billion, have also been extended, with the deadline for applications moving from the end of January to the end of March.
Mr Sunak said: ‘Our package of support for businesses and workers continues to be one of the most generous and effective in the world – helping our economy to recover and protecting livelihoods across the country.
‘We know the premium businesses place on certainty, so it is right that we enable them to plan ahead regardless of the path the virus takes, which is why we’re providing certainty and clarity by extending this support, as well as implementing our plan for jobs.’
He also announced the next budget will be held on March 3, with officials already drawing up a range of options depending on the state of the pandemic.
The massive spending announcement came just hours after the Chancellor issued a fresh warning on the scale of state borrowing. The Office for Budget Responsibility is forecasting a record deficit of £394billion following a year of sharp economic contraction and massive pandemic related spending.
In an interview with the Spectator magazine yesterday, the Chancellor said: ‘It is clearly not sustainable to borrow at these levels. I don’t think morally, economically or politically it would be right.
‘Running a structural deficit years into the future, with debt rising? That’s not building up the resilience you need to deal with the future shock that will come along.’ Mr Sunak said he was uneasy about relying on low interest rates to underpin massive borrowing. He warned that even a small rate rise would now have ‘huge cash implications’.
However, he ruled out the idea of a wealth tax, saying: ‘We’re a party that believes in aspiration. We should be celebrating aspiration.’
The furlough scheme, which has already cost £46.4billion, sees the Government pay 80 per cent of the salary of employees for hours not worked.
Employers will be required only to cover wages, national insurance and pensions for hours worked, and national insurance and pensions for hours not worked.
The decision to extend the scheme until the end of April means that up to two million workers will have had their salaries paid by the state for an entire year.
A Whitehall source said: ‘The idea we will be back to normal by March is just not realistic. It will depend in part on how quickly the vaccine can be rolled out, but there are still likely to be significant restrictions in place at that point.’
The Confederation of British Industry said the extension would bring ‘ some much-needed certainty and respite’ for businesses.
Emma McClarkin of the British Beer and Pub Association said the extension was a ‘hugely positive move’ when 85 per cent of pubs were closed or unviable because of coronavirus.
‘Celebrating aspiration’