AN extension to the furlough scheme has today been ruled out by the Business Secretary.
It comes as the coronavirus wage support scheme begins to be wound down from today, sparking fresh fears for jobs.
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The government has reduced its support from today
Speaking on the BBC Radio 4 Today programme, Cabinet Minister Kwasi Kwarteng said: ” Furlough was an exceptional policy in extreme times, in unprecedented times and it was always the case that the furlough was going to come to an end at some point.
“I think the Chancellor’s right, he’s made an assessment that as the economy opens up, the furlough should be tapered.”
But when challenged by presenter Justin Webb over how the tapering off of support doesn’t match the much slower lifting of lockdown restrictions.
Social distancing rules are expected to remain in place until at least July 19 forcing businesses, such as pubs and shops, to operate reduced numbers.
As a result, fewer members of staff are needed compared to pre-pandemic levels.
Mr Kwarteng added: “The furlough wasn’t going to last forever and I think as we open up in two weeks time, this is the right time to think about the balance of payroll – how much the government pays and [how much] employers pay.”
Companies have to start chipping in more to the government’s flagship wage support scheme from July, increasing their contribution from August.
The support is due to be withdrawn completely by September 30, 2021.
Job loss fears
But there are fears the scheme changes could prompt redundancies because employers can’t afford to take on the increase of costs.
Myron Jobson, Personal finance campaigner at interactive investor said: “Employers are now being told to make a bigger contribution to the wages of furloughed staff during the final months before the scheme is wound up at end of the September.
“The idea is making it more expensive to furlough workers will encourage employers to take them back full-time if they can, and only furlough those they have to.
“However, the additional financial burden on employers, who already have to pay pension and National Insurance contributions for their workers, might prove too much for some and result in redundancies.”
Furlough was first announced in March 2020 and pays workers 80% of their wages for hours not worked up to £2,500 per month.
From today, the level of government support has reduced to 70% up to a maximum of £2,187.50 for hours not worked.
But the government is keeping the 80% rule so employers will have to top-up the remaining 10% up to £312.50 to receive the support.
Further winding down of the scheme will see the the government’s contribution reduce to 60% in August and employer contributions increasing again to 20%.
Mr Jobson added: “There is still a long way to go to get the remaining 3.4 million back to work before the scheme is wound up at the end of September.”
The recovery of the economy after coronavirus could also be weaker than expected, new research reveals, and the tapering of the coronavirus job retention scheme should be pushed back.
It comes after the last stage of lockdown easing pencilled in for June 21 was delayed to July 19.
The Trade Union Congress (TUC) has urged the government to extend furlough.
Frances O’Grady, head of the union, told Trending In The News: “Our economy is not out of the woods. We can’t afford for more companies to go the wall, taking good jobs with them.
“The Chancellor needs to announce now that he will extend furlough for as long as is needed, rather than cutting it off abruptly in three months’ time.
“Working families need this certainty – not a rollercoaster approach to protecting livelihoods.”
Experts have also warned the the recovery of the jobs market and economy risk breeding “complacency” and that emerging from the pandemic would be a “bumpy ride”.
More vacancies than pre-pandemic
Fresh research by the The Resolution Foundation think tank found that four in five workers who were furloughed during the first and second lockdowns are now back working.
There are also more vacancies compared to before the pandemic.
But the hours people are working remain at recession levels and wage growth is unlikely to be as strong as government figures suggest when accounting for low-paid workers leaving the workforce.
Gregory Thwaites, research director at the Resolution Foundation said: “The UK economy is bouncing back rapidly after a deep and painful recession. It’s particularly welcome to see so many furloughed staff back working again.”
“But these encouraging signs risk breeding dangerous complacency, as people over-play the health of the labour market, and under-play the risks that still lie ahead.”
The Treasury said the scheme offered vital support for livelihoods over the pandemic “protecting 11.5 million jobs at a cost of £65 billion”.
A spokesperson said: “We saw over a million people come off the scheme over March and April as the economy begins to reopen and people continue to get back to work.”
“We will continue to take the necessary steps to ensure employers can access the skilled workforce they need as we safely reopen the economy, including through schemes like Kickstart, apprenticeships, and traineeships.”
One in three hospitality firms do not have enough staff to cope with reopening as lockdown eases, putting the nation’s economic recovery at risk.
But some pub and and restaurant bosses are demanding Chancellor Rishi Sunak ends furlough to combat a spiralling recruitment crisis.
The furlough scheme has been extended a number of times as the pandemic continues, with the last changes announced in the Budget in March this year.
