Coronavirus: Furlough scheme extended until end of March, Chancellor Rishi Sunak announces

The furlough scheme will be extended until the end of March, the chancellor has announced.

The scheme, in which employees receive four-fifths of their current salary up to a maximum of £2,500 of hours not worked, was established in March this year and originally scheduled to end last month.

But it was extended when Prime Minister Boris Johnson announced a new four-week lockdown in England last weekend.

Addressing MPs in the Commons on Thursday, Rishi Sunak announced a further extension into next year.

He confirmed the payments would remain at 80% of people’s wages, with a review of the policy in January.

This would “decide whether economic circumstances are improving enough to ask employers to contribute more”, Mr Sunak said.

The chancellor also announced support for the self-employed, with the next income support grant for November to January increasing to 80% of average profits up to £7,500.

“Our highest priority remains the same: to protect jobs and livelihoods,” he told MPs.

Mr Sunak said that “upfront guaranteed funding” for the devolved administrations will be increased by £2bn.

“The furlough scheme was designed and delivered by the government of the United Kingdom on behalf of all the people of the United Kingdom, wherever they live,” he said.

“That has been the case since March, it is the case now and will remain the case until next March.”

Wales First Minister Mark Drakeford welcomed the news, writing on Twitter: “We’ve been calling for this for some time.

“At long last, businesses and workers have some certainty about this vital support scheme to help them get through the pandemic.”

And in an attempt to pre-empt criticism over another U-turn, Mr Sunak said he needed to make “rapid adjustments” to the government’s economic response to the COVID-19 pandemic because of how the virus has spread.

The chancellor said the second lockdown – which was the “only viable solution left to protect our NHS” – had necessitated a change in approach.

He told MPs: “And so given these changed public health restrictions and the economic trauma they would cause in job losses and business closures, I felt it best to extend the furlough scheme rather than transition at that precise moment to the new job support scheme.

“Political opponents have chosen to attack the government for trying to keep the economy functioning and to make sure the support we provide encourages people to keep working.

“And they 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.

“We all hope for the best but make sure we plan for any eventuality.”

Mr Sunak said he would “leave it to the people” to decide whether the government’s actions were right.

“What I know is the support we’re providing will protect millions of jobs,” he added.

Paul Johnson, director of the Institute for Fiscal Studies think-tank, said he was “taken aback” by the chancellor’s statement.

He tweeted that it was “basically [a] return to March schemes (dreamt up on the hoof in 24 hrs) as if nothing learnt since”.

Mr Johnson added: “Wasteful & badly targeted for self-employed. No effort at targeting sectors/viable jobs for employees. Big contrast to position just days ago.”

In contrast, the Resolution Foundation think-tank described the move as the “right call” and “a price worth paying to protect people’s incomes”.

Labour’s shadow chancellor Anneliese Dodds said the chancellor was “always a step behind” and “keeps ignoring” businesses and workers “until the last possible moment after jobs have been lost and businesses have gone bust”.

She continued: “Now when the lockdown was announced, the prime minister said furlough would be extended for a month – five hours before that scheme was due to end.

“Two days later, realising the self-employed had been forgotten, there was a last-minute change to the self-employed scheme. And now, further changes.

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

The Scottish National Party’s economic spokeswoman Alison Thewliss said the Treasury had ignored the plight of the devolved administrations until England’s second lockdown.

She told the Commons: “The reality is that Scotland, Wales, Northern Ireland and the North of England have been dingied by this chancellor until he was forced to lock down in England.”

Analysis: Furlough extension a significant change in direction for the chancellor
By Kate McCann, political correspondent

This is a significant extension of the furlough scheme and also a significant change in direction too.

It comes not long after the chancellor said that extending furlough would be the kind of move that businesses wouldn’t welcome – perhaps explaining why he spent a significant part of his statement on the political justification for this policy change.

He claimed that being agile and changing direction is a benefit, not a weakness.

But Labour’s repeated criticism of short-term planning and the impact it has on businesses will be difficult for the chancellor to ignore.

It was quite unusual to see Rishi Sunak set out a timeline for why he has made the decisions he has made. He argued, essentially, that in a pandemic like this it is almost impossible to plan ahead.

We know Mr Sunak has been a voice inside government arguing for the tiered system and an alternative to big lockdown measures because of the big economic impact.

He made clear that the extension to March doesn’t mean lockdown will be extended until then but that businesses see a much longer-lasting effect of such strict measures.

What we don’t know is whether furlough will stay at 80%. It will be reviewed in January and if the chancellor thinks timing is right employers could be asked to pay in more to that pot.

While this move will be welcomed by those running businesses across the country, there is a huge cost which will be a burden on the public purse and at some point that will have to be clearly set out.

There are questions too from businesses about the grants that had been announced to keep people in work.

Those have now been withdrawn and, while they will be reinstated at some point, some employers may have been relying on them to get through a difficult winter ahead.

Mr Sunak also made a point about the strength of the union, following criticism of how the UK government has proceeded on furlough when it comes to Scotland, Wales and Northern Ireland.

This time, the chancellor was definitive that this change will extend across the whole of the UK.

(c) Sky News 2020: Coronavirus: Furlough scheme extended until end of March, Chancellor Rishi Sunak announces