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Thu, 9 July 2020

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Coronavirus furlough scheme: Rishi Sunak ‘to ask employers to start paying a fifth of wages’

Coronavirus furlough scheme: Rishi Sunak ‘to ask employers to start paying a fifth of wages’

Chancellor Rishi Sunak will outline changes to the Coronavirus Job Retention Scheme in the coming days.

2 min read

Firms will be asked to pay a 20% of the wages of employees on the Government’s furlough scheme, Chancellor Rishi Sunak is expected to announce.

Under plans set to be unveiled later today, the Treasury will announce that it is paring back the Coronavirus Job Retention scheme amid concerns about its spiralling cost to the public purse.

More than 8 million workers have so far been furloughed under the scheme, which sees the state step in to pay 80% of an employees’ wages up to a maximum of £2,500 a month.

Figures released this week show that the scheme has already cost £15bn.

According to The Financial Times, Mr Sunak will make an announcement shortly on reducing the level of government support.

He is expected to say that from August firms will be asked to start paying 20% of staff wages, their National insurance contributions and their pension contributions - meaning furloughed staff would continue to receive the same wages as before, but with a reduced state share.

The scheme is also expected to be closed to new entrants from the end of June, and all employers currently on the scheme will be required to start paying.

The Coronavirus Job Retention Scheme has already been extended to October from its original cut-off date of June, but Treasury sources have indicated that the October end date will be definitive.

Speaking to Sky News on Friday morning, Cabinet minister George Eustice said: “The furlough scheme has been incredibly important in terms of keeping people on standby and ready to return to work. 

“Clearly as we start to emerge from the lockdown and start to get our economy back to work, we can’t keep people on that furlough scheme indefinitely.”

And the Environment Secretary added: “We need to start identifying ways of moving them off the furlough scheme and back into work... We need a furlough scheme that can be tapered down as people return to work.”

Mr Sunak has already warned that the UK is facing a “very serious economic crisis” in the wake of the Covid-19 shutdown, with the UK economy already shrinking by 2% in the first three months of 2020.

The Chancellor said earlier this month: "It is now very likely that the UK economy will face a significant recession this year, and we're already in the middle of that as we speak."

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