Furlough extended as calls grow for quicker reopening
Sunak planning for slow recovery with Budget spending despite encouraging signs over efforts to counter Covid
RISHI SUNAK will today announce that the furlough scheme will continue until the autumn, even as data show that efforts to counter Covid-19 are exceeding expectations.
Unveiling his Budget, the Chancellor will pave the way for tens of billions of pounds in extra spending by extending furlough and the Universal Credit uplift until the end of September, and confirming further sizeable grants for the self-employed.
It suggests the Government believes businesses will not be fully back to normal until the autumn, and comes despite new analysis showing the decline in coronavirus deaths in England is around three weeks ahead of the central modelling estimates, fuelling calls for a quicker reopening.
Mr Sunak will justify the decisions by declaring he will do “whatever it takes” to protect the British people and businesses through this “moment of crisis”.
But he faces unease from Tory backbenchers about increased levels of spending as well as resistance to the need for tax rises.
Self-employment grants of up to £2,500 a month until April will be announced, as The Daily Telegraph disclosed last month, with a scaled-back grant on offer after that.
The Universal Credit uplift of £20 a week will be extended by six months, and a string of summer spending plans to support pubs, sports and the high street will be announced.
“We’re using the full measure of our fiscal firepower to protect the jobs and livelihoods of the British people,” Mr Sunak will say in his Budget speech.
Defending the new spending, he will also say: “We will continue doing whatever it takes to support the British people and businesses through this moment of crisis.” But Mr Sunak also aims to “level” with the British public about the need to eventually get spending back under control.
He is expected to signal a rise in corporation tax for the years ahead and launch a “stealth” income tax raid by freezing the £12,500 and £50,000 thresholds. “Once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that,” Mr Sunak will say.
The decision to extend the furlough scheme, which sees the Government cover most of the wages of many workers sidelined during the pandemic, to the end of September is likely to be scrutinised. Under the Government’s reopening “roadmap”, almost all lockdown restrictions are due to be lifted by June 21 at the earliest, meaning furlough could continue months after businesses can reopen.
There are also signs that the speedy rollout of Covid-19 vaccines – more than 20million people in the UK have now had a jab – is having a better than anticipated impact. Projections from SPI-M (Scientific Pandemic Influenza Modelling group), which was pivotal in developing the roadmap, suggested Covid deaths in England would not fall below 200 a day until around mid-march, but that figure was reached on Feb 25.
As Tory debate over tax and spending intensifies, Lord Hammond, the former Tory chancellor, stressed tax rises alone were not enough to level the public finances post-covid, saying: “Anybody who says that the challenge can be met only by increases in taxation or only by cuts in public spending is not being straight with people.” And Steve Baker, the Tory backbencher, told The Telegraph: “I’m trying to come to terms with whether the party of which I’m a member still believes in anything like sound money and balanced budgets.”
The Government will continue to cover 80 per cent of wages of workers involved in the furlough scheme, up to £2,500 a month, to the end of June. From then, it will cover 70 per cent of wages in July, with firms involved having to pick up the other 10 per cent. In August and September the Government will cover 60 per cent, with companies contributing the extra 20 per cent.
At the start of this year, the number of workers benefiting from the scheme dropped to around 5million, from a high during the pandemic of 11 million.
The exact estimated cost of the fivemonth extension is expected to be above £10 billion.
Rain Newton-smith, chief economist at the Confederation of British Industry, said: “Extending the scheme will keep millions more in work and give businesses the chance to catch their breath as we carefully exit lockdown.”
The Chancellor will announce that the fourth self-employment grant of the pandemic will see 80 per cent of monthly trading profits covered, up to £7,500 in total over the three-month period. It will also be open to people who became self-employed in the 201920 tax year for the first time, closing a loophole that will mean around 600,000 more people are eligible. A fifth grant will come from May.
Bridget Phillipson, shadow chief secretary to the Treasury, said: “These changes to support schemes could have been made months ago. Businesses and workers have had to wait because he said it wouldn’t be appropriate until the Budget. Announcing it the night before shows the focus is on Rishi Sunak getting his moment in the sun rather than protecting jobs and livelihoods.”
‘We will continue doing whatever it takes to support the British people and businesses through this moment of crisis’