Rishi set to shut furlough scheme for new entrants

COMPANIES will be barred from putting any more workers into the furlough scheme under plans to be unveiled by the Chancellor this week.

A cut-off point would help address fears within the Treasury that some companies will attempt to play the system so they can bring staff back part-time.

Rishi Sunak is also preparing to outline how much employers will have to pay towards their employees’ wages from August.

One business group warned last night that the furlough cut-off would hit companies hard. Tej Parikh, chief economist at the Institute of Directors, said: ‘While the Treasury is keen to reduce its spend on the scheme, for firms that have tried to hold off using it and may now need to, this will be a bitter pill to swallow.

‘As the scheme winds down, other measures to cushion costs will be necessary to support businesses as they try to return to work.’ Mr Sunak has extended the Job Retention Scheme until the end of October, amid fears ending it any sooner could cause mass unemployment.

The scheme is also being made more flexible to allow employers to bring furloughed workers back part time.

But there are growing concerns about the cost, with the Office for Budget Responsibility estimating it could be as much as £84billion. Already eight million workers have been furloughed, a quarter of UK jobs, at a cost of more than £11billion. HM Revenue & Customs is set to reveal the latest figures this morning.

Under the retention scheme, the Government pays 80 per cent of furloughed workers’ wages, up to £2,500 a month.

From August, Mr Sunak has said he expects employers to pay a contribution towards the costs. Under draft plans, employers would pay a fifth of furloughed workers’ salaries, meaning taxpayers would foot 60 per cent of the wage bill. This would apply to both full time and part time workers, with employers also expected to pay national insurance contributions.

In return for bowing to demands from employers to allow furloughed workers to return part time, Mr Sunak will ‘close the scheme to new entrants’. The move, reported in the Financial Times, is designed to ensure it is seen as a back-to-work scheme rather than one encouraging employers to reduce staff.

Critics have expressed concerns the scheme is being used by some firms as a ‘waiting room’ for unemployment, with many furloughed workers set to lose their jobs.

British Airways, Virgin Atlantic and Rolls-Royce have announced job cuts, just weeks after furloughing staff and signing up for taxpayer subsidies. Yesterday supercar maker McLaren became the latest as it announced plans to axe more than a quarter of staff. The Woking-based firm, whose cars can fetch £2million, has been hit hard by the Coronavirus crisis. It has been forced to suspend production and shut down Formula One races.