Rishi Sunak 'will cut furlough scheme to 60% from July'

Rishi Sunak 'will cut furlough scheme to 60% from July'

May 12, 2020

Beginning of the end for government coronavirus bailouts? Rishi Sunak ‘will cut furlough scheme to 60% from July’ and cover part-time hours to avoid ‘cliff edge’ as ministers urge people to go back to work

  • Scheme currently paying up to 80% of wages, to a maximum of £2,500 a month
  • Reports suggest the rate could be lowered after June and last until September
  • Pubs, restaurants, hairdressers, and gyms face closure until July at the earliest
  • Here’s how to help people impacted by Covid-19

Rishi Sunak could signal the beginning of the end for the government’s massive coronavirus bailout today as he overhauls the furlough scheme.

The Chancellor is expected to extend the multi-billion pound subsidy – which currently covers 80 per cent of wages up to a ceiling of £2,500 a month – to September.

But speculation has been mounting that he will cut the proportion of pay to 60 per cent after the existing end date of July, as ministers urge people to return to work and loosen the lockdown strangling the economy.

With concerns the scheme is costing £14billion a month – roughly equivalent to the NHS budget – Mr Sunak is also set to tell the Commons that it will be available for workers who go back part-time, in a bid to ‘wean’ businesses off the support.

Former Bank of England governor Lord King warned this morning that the scaling down of the furlough arrangements should be linked to the state of the economy, not any particular timeframe.

‘The furlough scheme ought to be linked to the performance of the economy and not to a particular calendar timetable,’ he told BBC Radio 4’s Today programme. 

Chancellor Rishi Sunak will make a major announcement on the multi-billion-pound furlough scheme today

A construction worker in site in Guildford, Surrey yesterday. The government is urging everyone to return to their jobs, even if they cannot work from home 

The Treasury is known to be looking at ways to cut back the scheme that is paying up to 80 per cent of wages, up to a maximum of £2,500 per month.

But some workers in sectors facing months more of uncertainty could reportedly receive supplements if they cannot return to work, or only return part-time.  

The Chancellor could also reduce the threshold for self-employed workers – with anyone making over £30,000-a-year profits barred from the scheme, down from the current £50,000. 

Mr Sunak has insisted there will be no ‘cliff edge’ to the support, but admitted the scale of the bailouts are not ‘sustainable’.  

Boris Johnson’s roadmap for releasing the lockdown, published yesterday, suggested that hospitality businesses and others like hairdressers and gyms, face being closed until July at the earliest. 

Taking questions from MPs, Mr Johnson said: ‘I do think that the furloughing scheme has been one of the most remarkable features of the Government’s response and it is unlike anything seen internationally.

‘Six-and-a-half million people currently are being supported. It is absolutely right that we should do it.

‘I don’t want to anticipate what (Mr Sunak) is going to say but the House will hear more about that tomorrow.’

Mr Johnson’s roadmap for releasing the lockdown, published today, suggested that hospitality businesses and others like hairdressers and gyms, face being closed until July at the earliest

The current version of the scheme is due to expire at the end of June, with firms able to claim 80 per cent of a furloughed worker’s wages up to a monthly cap of £2,500. 

 First announced in March, the move was opened for three months, backdated from March 1 to the end of May, and was later extended by a month until the end of June.

Deputy Labour leader Angela Rayner told Today the furlough cover should continue ‘as long as we need it’.

Ms Rayner added: ‘We can’t afford not to do it correctly. I think it is really important the Chancellor continues with the good practice of making sure that furlough scheme is in place and doesn’t try and reduce it too soon, because that will cost us in the longer term.

‘Many families wouldn’t be able to survive right now if it wasn’t for things like the furlough scheme, it is absolutely right the Government has stepped in but they can’t now pull the rug from underneath people’s feet – they have to continue to support people throughout this crisis.

‘We will have to look at how the economy recovers, but it is not going to recover quickly enough if we pull the rug from people now and people end up destitute and we end up having that R rate spiking again and back in lockdown.’ 

Asked about the continuation of the furlough scheme, Health Secretary Matt Hancock told Sky News: ‘We have said that shouldn’t be a cliff-edge in the furlough scheme, but at the same time, we do need to try to get the economy back to something more like normal.’

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