UK chancellor Rishi Sunak has caved into pressure to extend the furlough scheme once more, promising more generous support until next March for workers in struggling firms.
The finance minister made the latest in a string of recent announcements expanding job support in parliament on Thursday. He confirmed the government’s furlough scheme will continue beyond the current December cut-off across the UK, offering subsidies worth 80% of previous wages for workers on leave.
Employers will only have to pay insurance and pension contributions, with a review in January to see if they should contribute more. Plans for a bonus in February for employers keeping staff post-furlough have been delayed until “an appropriate time.”
The chancellor also announced the self-employed income support scheme (SEISS) would continue to pay 80% of average profits, rather than be cut as previously planned. Meanwhile Sunak promised another £2bn ($2.6bn) in general funding for the UK’s devolved administrations.
“People and business will want to know what comes next,” he told MPs. “They want certainty.”
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It marks a significant U-turn for the chancellor and prime minister Boris Johnson. Both had repeatedly declared it was time to move on from subsidising furloughed workers in struggling industries. They had already extended furlough by a month to December and agreed recently to make the replacement job support scheme more generous, but only in coronavirus hotspots and at 67% of previous pay.
But the second wave, tighter restrictions and pressure from business and union chiefs have forced a change in stance. Carolyn Fairbairn, director-general of the Confederation of British Industry (CBI), had said on Thursday an extension was the “right thing to do,” saying firms needed more certainty and stability to recover.
The chancellor had also faced heavy criticism from political leaders in Scotland, Wales, the North, and the Midlands for only extending furlough and making job support more generous when London and then England faced tighter curbs. Their areas faced restrictions with less aid for employers and jobs.
“I have had to make rapid adjustments to our economic plans as the spread of the virus has accelerated,” said Sunak in defence of the latest changes.
Sunak acknowledged the economic impact of the second England-wide lockdown coming into force on Thursday, after MPs backed a four-week shutdown in a vote on Wednesday.
Sunak told parliament that UK economic recovery was slowing, and the economic impact of England’s lockdown would outlast new restrictions. “Given this significant uncertainty, a worsening economic backdrop, and need to give people and businesses security through winter, I believe it is right to further.”
“Non-essential” shops, hospitality and leisure sites have been forced to close until 2 December. Economists and business groups expect this to take a heavy toll on firms and jobs. Different restrictions apply across the UK, set by devolved administrations.
It comes on the same day the Bank of England ramped up its support even further for the UK’s economy and the government’s finances. The central bank announced it would pump another £150bn ($194bn) into buying up government debt from investors, more than expected by analysts.
Official figures last month showed UK government debt is at its highest level in 60 years compared to the size of the economy. Borrowing has plugged the gap between soaring spending and declining tax receipts, and mass bond-buying by the central bank with newly created money has kept a lid on borrowing costs.
The Bank of England has been institutionally independent from central government for more than two decades, but Sunak said he and the bank’s governor Andrew Bailey were in “constant communication.” He said their measures were “carefully designed to complement each other.”
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