Rishi Sunak tonight announced that furloughed staff will be allowed to return to work on a part-time basis from July – a month earlier than originally planned.
The Chancellor said firms will soon be able to take advantage of what he described as ‘flexible furlough’ which will enable employees to return as long as companies pick up a percentage of their salary equivalent to the hours they work.
Mr Sunak used the daily Downing Street press conference to set out a major shake up of the furlough scheme as he said businesses must start to share the wage burden from August before the initiative is finally brought to an end in October.
However, the proportion they will be asked to contribute will be tapered up to a maximum of 20 per cent over the three month period.
The Chancellor stressed the UK scheme would remain ‘among the most generous in the world’, but said businesses should start helping to pay the wage bill of furloughed works despite fears of a wave of redundancies.
After an outcry from Tory MPs, he also announced an extension to separate support for the self-employed – with grants continuing until August, but slightly scaled back.
As the cost of the bailouts soar, Mr Sunak is desperately trying to balance the need to wean companies off government money with keeping the economy on life support during lockdown.
The furlough scheme currently covers 80 per cent of pay for employees, up to a ceiling of £2,500 a month. Some 8.4million jobs are currently being propped up, to a total value so far of £15billion.
Under the new framework staff will have the same safety net until October, but firms will have to pick up some of the tab from August.
That month they will need to pay national insurance and pension contributions for their staff on furlough.
In September that will be expanded to 10 per cent of wages, and then in October it will be 20 per cent before the scheme then closes.
Chancellor Rishi Sunak (pictured in Downing Street tonight) has declared that businesses should start taking some of the burden despite fears of a wave of redundancies
Mr Sunak said: ‘Our top priority has always been to support people, protect jobs and businesses through this crisis. The furlough and self-employment schemes have been a lifeline for millions of people and businesses.
‘We stood behind Britain’s businesses and workers as we came into this crisis and we stand behind them as we come through the other side.
‘Now, as we begin to re-open our country and kickstart our economy, these schemes will adjust to ensure those who are able to work can do so, while remaining amongst the most generous in the world.’
The maximum 20 per cent – 60 per cent split between the employer and state that Mr Sunak has settled on is lower than the 50 per cent share for businesses that had been previously mooted.
The Treasury said individual firms will decide the hours and shift patterns for their part-time employees, and be responsible for paying their wages while in work.
Another 2.3million self-employed are receiving grants equivalent to 80 per cent of their usual monthly profits, to a ceiling of £2,500.
Ministers had been indicating until recently that the current round, up to next month, was likely to be the last.
But Mr Sunak revealed there will be a ‘second and final grant’ in August.
It will be worth 70 per cent of average monthly trading profits, paid out in a single installment covering three months’ worth of profits, and capped at £6,570 in total.
Business and union leaders welcomed the Chancellor’s announcements, especially the gradual reduction in furlough contributions from the Treasury.
British Chambers of Commerce director general Adam Marshall said: ‘The Chancellor has listened to business communities and struck a careful balance that will help many firms bring furloughed staff back to work flexibly over the coming months.’
TUC general secretary Frances O’Grady said: ‘We’re glad the Chancellor has listened to unions and allowed employers to start using short-time furlough from July. This will help employers gradually and safely bring people back to work, protect jobs and support the economy to recover.’
Dame Carolyn Fairbairn, the CBI’s director general, said: ‘The Government’s support throughout the lockdown so far has been a lifeline for businesses, employees and the self-employed. The changes announced will help ensure the schemes stay effective as we begin a cautious recovery.
UK plc is heading for the worst recession in 300 years, with millions of jobs expected to be lost and the prospects for a quick bounce back unclear.
Bank of England Governor Andrew Bailey underlined the perilous state of the economy yesterday by raising doubts about the speed of any recovery and making clear a fresh wave of quantitative easing – effectively printing money – will be needed.
The intervention came as new economic indicators showed that just 14 per cent of stalled businesses are expecting to restart their operations over the next fortnight, and they are likely to bring back only 31 per cent of furloughed staff.
Online job ads have halved between March and May, according to the Office for National Statistics.
Figures released on Wednesday showed another 400,000 have been furloughed over the past week, with a million employers now putting in for a total of £15billion
Since the crisis began in March, the Bank has cut official interest rates to an historic low of 0.1 per cent, announced a £200billion expansion of QE, made moves to ease the financial pressure on large companies and made it easier for banks to lend.
George Eustice, the Environment Secretary, refused to be drawn this morning on what Mr Sunak would announce, but said: ‘Clearly as we start to emerge from the lockdown and start to get our economy back to work we cannot keep people on the furlough scheme indefinitely.
‘We need to identify ways of moving them off the furlough scheme and back to work.’
Asked on Sky News whether there will be continued support for the self-employed, Mr Eustice said: ‘Well obviously it is nearly a month ago now that we said we wanted to reopen those bits of the economy that couldn’t work from home, so we’ve been encouraging the construction industry for instance to get back to work.
‘A lot of those self-employed professions such as plumbers, electricians and so on, those people are able to return to work now, albeit observing social distancing, but we need to try to start to get bits of the economy back to work.
‘Now I don’t know what Rishi Sunak, the Chancellor, will say later in terms of self-employed and the furlough scheme for them, but I think there is a general overarching message here that we’ve had a very generous furlough scheme in place to help people through these extraordinary times and to ensure that businesses’ overheads could be covered.’