Rishi Sunak has announced a multibillion-pound extension of the government’s 80 per cent furlough scheme until March as he warned of a “difficult winter” ahead.
The chancellor announced that the furlough scheme would remain in place when the nationwide lockdown came to an end on December 2.
Mr Sunak said that the £1,000 job retention bonus for companies taking back furloughed workers, which was due to be paid out in January, would “fall away” as a result of the new announcement.
It represents a significant change in position from Mr Sunak, who previously said that furlough could not be extended “endlessly” as he sought to protect “viable” jobs. The job retention bonus was a significantly less generous scheme to support people to go back to work on a part-time basis.
The chancellor also announced that grants for self-employed workers will be raised from 55 per cent of average profits in the three months to January to 80 per cent, up to a maximum of £7,500.
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Explaining the government’s rethink, Mr Sunak said that the government had hoped during the summer that “we would be able to stay ahead of the virus” and that the country would continue to be “economically open”.
However, the continued spread of the virus and lockdowns, and the “economic trauma” caused by new restrictions, had left him with no choice but to act. “It is not a weakness to be agile and fast-moving in the face of a crisis but rather a strength, and that will not change,” he said.
“I know that people watching at home will have been frustrated by the changes the government has brought in during the past few weeks.
“I have had to make rapid adjustments to our economic plans as the spread of the virus has accelerated.” He added: “They [the opposition] will now no doubt criticise the government on the basis that we have had to change our approach. But to anyone in the real world that’s just the thing you have to do when the circumstances change.”
The Treasury said that the cost of support for the self-employed would be up to £7.3 billion, £2.8 billion of which was new money announced today. The furloughing scheme costs about £5 billion a month, although the cost depends on the take-up of the scheme. The government will review the scheme in January.
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It came as the Bank of England announced another £150 billion of quantitative easing — printing money — to prop up the economy.
The number of people on furlough is expected to jump from about two million at the end of October to 5.5 million in November during the one-month lockdown. At the height of the pandemic in April and May 8.9 million people were on furlough. Unemployment stands at 4.5 per cent and the Bank had previously estimated a peak of 7.5 per cent.
