The Government is considering cutting the proportion of workers’ wages it pays under the Covid-19 furlough scheme from 80% to 60%.
The initiative now supports the wages of 6.3million employees, almost a quarter of Britain’s private-sector workforce, who have temporarily stopped work at a cost of around £8billion.
In total, it’s estimated to cost the Treasury £30billion, with Chancellor Rishi Sunak warning it’s costing the Government similar levels to the NHS.
The support is due to stop at the end of June, after being extended by a month already.
Finance minister Rishi Sunak said on Monday there would be no sudden cliff-edge in June but that he was looking at the best way to phase the scheme out and ease people back to work “in a measured way”.
According to the Evening Standard, a leading option is to lower the proportion of furloughed staff’s wages that the government pays to employers to 60% from 80%.
Employers could then make up the difference, though this would be discretionary. Another approach would be to allow some furloughed staff to work, but with a smaller taxpayer subsidy.
Cutting the rate could be one way to wind down the scheme
Britain’s finance ministry declined to comment on the possible options for winding down the scheme.
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The government is due to review the lockdown on Thursday, and Prime Minister Boris Johnson is expected to give more details of his approach on Sunday.
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Under phase two of the Government’s plan, schools could be partially reopened, while some non-essential shops and businesses could also be given the green light to trade again.
The Job Retentions Scheme (JRS) – the official name for furlough – is now covering nearly a quarter of UK jobs – 23% of the employed workforce.
About 2.5million people registered for the scheme last week, bringing the total claims to 6.3million.
On Tuesday, Rishi Sunak warned the public that its level of expenditure “is not sustainable”.
He said mnisters are in talks to wind down the scheme as more people return to work.
“I am working as we speak to figure out the most effective way to wind down the scheme and ease people back into work in a measured way,” he said.
“As some scenarios have suggested, we are potentially spending as much on the furlough scheme as we do on the [National Health Service] for example. Now clearly that is not a sustainable solution.”
But he added, despite funding concerns, people would be eased back into work in a “measured way” with “no cliff-edge to the furlough scheme”.
According to the Liberal Democrats, there should be a “tapered” end to the programme, with the Treasury paying 50% of salaries for the first month after people return to work, falling to 30% after the third month, with employers picking up the full bill after the fourth.
Under the current JRS scheme, the Government covers 80% of wages, with employers having the option to foot the remaining 20%.
Over the past month, it’s attracted thousands of claimants, with 800,000 businesses now on the scheme.
However, some firms have come under criticism for exploiting the support – designed to help struggling businesses and prevent redundancies.
Richard Branson is among a list of billionaires who have applied for state support – despite not paying a penny income tax since relocating to his Caribbean Necker Island in 2014.
Struggling airline British Airways, Wetherspoons and Arcadia, owned by Philip Green, have also applied for tax-payer funding.