UK extends job support scheme until October

UK chancellor of the exchequer Rishi Sunak extended the UK’s furlough program through the end of October as the government sought to ensure as many jobs as possible survive the coronavirus lockdown.

Mr Sunak said there will be no changes to the job retention scheme program until the end of July, when more flexibility will be injected to allow employees to work part-time, with their wages split between the state and employers.

He promised more details on how the programme will be modified by the end of May.

Intervention

“This scheme has been a world leading economic intervention, supporting livelihoods and protecting futures,” Mr Sunak told the House of Commons on Tuesday. “It will provide eight months of support to all sectors and regions of the UK and provides a very good and generous runway for businesses and firms to plan against and start getting back to work when the time is right”

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He said 7.5 million jobs have been protected by the programme, benefiting almost a million employers.

With deaths and new infections falling, the government is trying to slowly reopen large parts of the economy that have been shuttered. That leaves Mr Sunak with a tricky balance to strike between easing the burden on state coffers while ensuring he doesn’t spark a wave of job losses by cutting support programs too fast, too soon.

“The extension of the job retention scheme will come as a huge help and a huge relief for businesses across the UK,” said British Chambers of Commerce director General Adam Marshall. “The changes planned will help businesses bring their people back to work through the introduction of a part-time furlough scheme.”

The chancellor – in the job since February – has largely been praised for his response to the pandemic to date. But turning off the spending taps and taking money out of people’s pockets risks bringing his honeymoon period to an end.

“In the context of huge unemployment that risks scarring us for years, the priority is to do nothing rash and ignore calls for a premature end” to the plan, the Resolution Foundation think tank said on Tuesday. “And as the furlough scheme steps back from its current central role, other forms of policy must step up.”

Wage

Under the program announced by Sunak in March, the state has been paying 80 per cent of a furloughed employee’s wage – up to a maximum of £2,500 (€2,844) a month – so long as the link is retained to their job. The Office for Budget Responsibility estimates the programme will cost £49 billion through the end of June.

The plan has been lauded as a success by the Bank of England and other economists, who credit it with saving millions of jobs and leaving the UK economy in a better position to bounce back from the crisis.

The Office for Budget Responsibility estimates Sunak’s package of tax cuts, wage support, grants and extra spending to support the economy through the pandemic totals about £104 billion pounds so far, in addition to £330 billion of loan guarantees.

The economic cost is making members of his Conservative Party uneasy, and many are calling for lockdown measures to be eased more quickly.

A poll of party members by the ConservativeHome website on Tuesday found that while more than half support the government’s plans, just over a third want to see a wider and quicker lifting of restrictions.

While the cost of the plan is eye-watering, the government is currently able to borrow at very low rates, with 10-year gilt yields under 0.3 per cent.

That’s largely down to the Bank of England’s asset-purchase program, which economists expect to be expanded as soon as next month, especially if government spending needs to be ramped up again. – Bloomberg