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Furlough scheme extended to March

Published:  05 November, 2020

Chancellor Rishi Sunak has announced that the government’s Job Retention Scheme, better known as the furlough scheme, will be extended until the end of March 2021, with government once again paying 80% of wages up to £2,500 to see businesses through a second wave of Covid-19 infections.

“The government’s intention is for the new health restrictions to remain only until the start of December,” Sunak said.

However, businesses need “certainty” and support in the face of a worsening economic backdrop.

“As we saw from the first lockdown, the economic effects are much longer-lasting for businesses and areas than the duration of any restrictions,” Sunak said.

“To give people and businesses security through the winter, I believe it is right to go further.”

The government therefore is providing “significant extra support to protect jobs and livelihoods, in every region and nation of the United Kingdom,” which will include the extension to the coronavirus Job Retention Scheme well past its initial November end date.

Businesses will only have to pay the cost of employer national insurance and pension contributions, with a further review to follow in January.

The job retention bonus to incentivise employers to keep people in work until the end of January will fall away, with plans to “redeploy a retention incentive at the appropriate time”.

For the self employed, the income support grant, which covers the period of November to January, will now increase to 80% of average profits, up to £7,500.

Sunak also faced off against criticism of the handling of a second lockdown from Labour’s shadow chancellor Anneliese Dodds.

Dodds said that that the Chancellor keeps ignoring pleas for certainty “until the last possible moment, after jobs have been lost and businesses gone bust”.

She added that the Chancellor “ridiculed” earlier calls for a shorter, circuit breaker lockdown, and repeatedly had to change his economic plans.

"How many jobs could have been saved if this government had recognised reality and let businesses plan for the future?”

The Chancellor said he has had no choice but to make “rapid adjustments” to the government’s economic plans once the spread of the virus started to accelerate.

He also referenced the particular impact of stricter lockdown measures on the hospitality sector.

“It was our hope that the public health situation would allow us to keep businesses, and workplaces, open. The virus however, continued to spread and localised restrictions were having an impact. And so we intensified this approach and added further areas. As these restrictions intensified, the economic impact, particularly on industries such as the hospitality sector, were significant. So in response, we altered our approach to wage support, making it much more generous to employers and, in turn, protecting jobs.

"We also introduced a range of grants to businesses, whether open or closed, to help them meet their fixed costs, and additional funding for local authorities to respond to specific local economic challenges," he said.

Now however, as “The economic recovery has slowed, and the economic risks are skewed to the downside”, more support is needed.