Calls for furlough extension rejected by Rishi Sunak

Demands from businesses for the extension of the furlough scheme have been rejected by Rishi Sunak. This comes despite the government’s delay in easing the Covid-19 restrictions due to the rapid rise in cases of the Delta variant.

Labour and business leaders have said that a failure to uphold the emergency economic support in line with public health restrictions would result in struggling businesses going into bankruptcy, and thus threaten thousands of jobs.

With just a week before the lifting of all restrictions were due to be removed, sources reveal that the chancellor already has sufficient support measures in place to cope with a possible delay.

Two sources stated that Sunak had purposefully “gone long” at the March budget with furlough expected to end in September for this exact reason.

The scheme will require employers to contribute 10% of an employee’s wage from the beginning of July, rising to 20% in August, as taxpayer support is cut from the current level of 80%.

Shadow business secretary, Ed Miliband, noted many businesses are concerned about economic support ending while they are still unable to trade or profit. “The price of any delay to the roadmap must not be paid by businesses,” he said.

It is understood that the Treasury believes support measures targeted at businesses in the hardest-hit sectors have millions of pounds still available through grants from local authority and the government’s £1.57 billion cultural recovery fund for theatre and arts venues.

Since last March, sectors including retail, hospitality and leisure have been offered 100% relief on business rates and the tax paid on the premises they occupy. From 1 July, this is due to be cut to 66% but will remain in place until the end of March 2022.

In recent months, unemployment in the UK has stabilised by the help of the extension of furlough. The latest official figures reveal that 1.6 million people were jobless in the three months to March. This represents 4.8% of the workforce, down from 1.7 million in the three months to February.

According to the Bank of England, the jobless rate is set to peak at almost 5.5% after furlough ends, compared with 4% prior to the pandemic.

A spokesperson for the Treasury stated: “The number of people on the furlough scheme has already fallen to the lowest level this year, with more than 1 million coming off the scheme in March and April – showing our plan for jobs is working”.