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Kwasi Kwarteng Defends Rolling Back Furlough Scheme Calling It "An Exceptional Policy In Extreme Times"

Kwasi Kwarteng Defends Rolling Back Furlough Scheme Calling It 'An Exceptional Policy In Extreme Times'

Kwasi Kwarteng said now as was the right time to end furlough (PA)

4 min read

Kwasi Kwarteng has defended the decision to roll back the furlough scheme from 1 July despite fears the changes could hit businesses still unable to open under lockdown restrictions.

The business secretary told BBC Radio 4’s Today programme that it was “the right time” to begin increasing employer contributions to the wages of furlough staff, as the UK was approaching the final stage of lockdown lifting.

But Labour has warned the decision could mean many businesses worst-hit by the pandemic are “left out in the cold” as support is withdrawn. 

As of today, employees retained under the furlough scheme will continue to receive 80% of their salary, but employers will now have to cover 10% of the costs for the first time 

This total will gradually rise over the coming months, with the next increase to 20% taking effect on 1 August.

“The 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,” Kwarteng told the BBC. 

“I think the chancellor is right. He's made an assessment that, as the economy opens up, the furlough should be tapered out.”

The business secretary continued: “All we're saying is that the employer should contribute something to the payroll.”

“Over the next three months, the furlough will be tapered away. It's a difficult decision to make. The furlough wasn't going to last forever. 

“As we open up in two weeks time, this is the right time to think about the balance of payroll, which the government pays.”

Kwarteng’s comments came as he announced the details of Nissan’s new £1 billion “gigafactory” in Sunderland, which will build batteries to support the production of electric vehicles. 

Boris Johnson described the plant — which is expected to support over 6,200 jobs across the factory and supply chain — as “a major vote of confidence in the UK and our highly-skilled workers in the North East”. 

It’s understood that the government is supporting the venture financially, but Kwarteng declined to confirm how much of the factor was being funded by the taxpayer.

“We're in conversations with lots of auto companies — lots of companies that are interested in investing in the UK — and it would be completely irresponsible for me to go into matters which are commercially sensitive,” he said. 

He added that the new plant showed that jobs and opportunities were being created by the UK’s pledge to ban petrol and diesel cars by 2030.

But questions still remained about how the end of the furlough scheme would affect jobs across the country as a whole.

Some groups have warned that phasing out the furlough scheme before lockdown restrictions are fully lifted could hit industries already worst affected by the pandemic.

Labour warned on Thursday that over 400,000 businesses in England alone could be affected as both businesses rate relief and the furlough scheme are gradually withdrawn.

The party is calling on the government to extend the measures, arguing that most of the people remaining on furlough are employed in sectors hit hardest by the ongoing restrictions such as hospitality, live events, accommodation and tourism.

“The public health restrictions and the economic support aren't working hand in hand,” Bridget Phillipson, shadow chief secretary to the treasury, told Times Radio. 

“The government has to delay the reopening because it failed to secure the border, and it's businesses who are going to pay the price.

She added: “It's right that [furlough] is tapered off. It's right that changes are made.”

“But many of the businesses that are now expected to contribute towards furlough are not operating at anywhere near capacity. They're just not making the returns that they would want. They're not operating as they can. “

Meanwhile, the GMB Union has warned that ending the scheme too soon could “kill a recovery before it even starts”. 

“Instead of driving us off a furlough cliff edge later this year, the Government should provide continued support for employers that need it – especially in those sectors that have been hammered by the pandemic,” general secretary Gary Smith said.

“Our recovery is a process, not an event. Ministers are seriously misguided if they think we can suddenly revert to business as usual.” 

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