Furlough scheme extended until March, chancellor announces

Government will pay 80 per cent of staff’s wages for hours not worked, with this reviewed in January to see if firms should be asked to start contributing

The coronavirus job retention scheme, extended at the last minute on 31 October until early December, will now be extended until March next year, the chancellor has announced.

Speaking in parliament this afternoon, Rishi Sunak said that in light of the economic toll England’s month-long national lockdown – which came into effect this morning – was likely to have on the economy, he was extending the scheme into next year.

Sunak said the government would continue to pay 80 per cent of furloughed staff’s wages for hours not worked, with employers only required to make national insurance and pension contributions. He added that the scheme would be reviewed in January to decide whether the economic situation had improved enough to start asking employers for contributions – as they were in September and October this year.

Because of the extensions to the furlough scheme, the job retention bonus would no longer be paid in January and a new retention incentive would be introduced “at the appropriate time”, Sunak said.

As expected, Sunak confirmed the furlough scheme would also be available to the devolved nations, and increased the upfront guaranteed funding for Scotland, Wales and Northern Ireland from £14bn to £16bn.

“The government’s intention is for the new health restrictions to remain only until the start of December. But as we saw from the first lockdown, the economic effects are much longer lasting for businesses and areas than the duration of any restrictions. And as the Bank of England has said this morning, the economic recovery has slowed and the economic risks are skewed to the downside,” said Sunak.

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“Given this significant uncertainty, a worsening economic backdrop and the need to give people and businesses security through the winter, I believe it is right to go further.” 

However, Anneliese Dodds, the shadow chancellor, criticised the government for being too slow in rolling out this additional support. She said businesses had been “pleading for certainty” and that the chancellor had kept “ignoring them until the last possible moment after jobs [had] been lost and businesses gone bust”.

“[This is] the chancellor’s fourth version of the winter economy plan in just six weeks. The chancellor can change his mind at the last minute... but businesses can’t,” said Dodds.

Responding to the announcement, Peter Cheese, CIPD chief executive, said employers had been “left confused” by the government’s plans over the last few weeks, and that many had already started making redundancies because of the uncertainty surrounding the end of the furlough scheme.

“Jobs have already been lost unnecessarily through short-term thinking because of the lack of longer-term certainty of support, and it is crucial policymakers try and look further ahead and work with employers to help them plan forwards and protect employment as much as possible,” said Cheese.

Nonetheless, he welcomed the extension, saying this was positive because businesses understood the furlough scheme and it provided the worst-hit sectors more time to plan ahead. “Any changes to the furlough extension should be communicated to businesses in good time,” he added.

Neil Carberry, chief executive of the Recruitment & Employment Confederation, also welcomed the extension and the stability it brought for businesses. But he said there was still more that could be done to support businesses and employees.

“The fight against the virus is being compromised by the failure to fund statutory sick pay (SSP) for every worker if they need to self-isolate,” said Carberry. “The vast majority of businesses supplying temporary workers, who are vital to sectors like education, logistics and care, are ineligible for SSP support – and a stand-off over who pays could lead to greater economic damage, as work gets shelved.”