Chancellor preparing to 'wean' businesses off coronavirus furlough scheme

6 May 2020, 06:26

Options being discussed by ministers include cutting the 80 per cent wage subsidy and lowering the £2,500 cap on monthly payments
Options being discussed by ministers include cutting the 80 per cent wage subsidy and lowering the £2,500 cap on monthly payments. Picture: PA
EJ Ward

By EJ Ward

Chancellor Rishi Sunak is considering how to wind down the Government's coronavirus furlough scheme as concerns over spiralling costs rise.

Concerns have been raised over the cost of the coronavirus wage scheme with the Chancellor planning to scale back the scheme from July.

The job retention scheme sees the Government pay 80 per cent of wages, up to £2,500 a month, to 6.3m furloughed workers.

The Treasury is reported to be examining several options for tapering the scheme, including cutting the wage subsidy paid by the state to 60 per cent and lowering the £2,500 cap on monthly payments.

Read more: What is the lockdown 'roadmap'? How will restrictions be lifted?

Another option being considered is to allow some furloughed staff to work but with a smaller subsidy for the taxpayer.

Government figures showing 6.3 million people are currently having 80 per cent of their salaries paid by the taxpayer at a cost of £8 billion.

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But Treasury sources insisted that "no decisions have yet been taken" over the scheme which was introduced to prevent firms from laying off thousands of workers during the lockdown.

Health Secretary Matt Hancock told Sky News earlier in the day that the Government must "wean off" businesses from the scheme "as the economy gets back on its feet".

Mr Sunak has acknowledged that the current level of expenditure was not "sustainable" in the long term but promised there will be no "cliff-edge" cut-off to the scheme. He said he is looking at the best way to phase the furlough scheme out and get people back to work.

Speaking to ITV News, he said the ministers were investigating ways to wind down the scheme currently due to run to the end of June in a "measured way".

Labour has called for the Government to make the scheme more flexible to allow people's gradual return to work.

And the Liberal Democrats have called for a "tapered" end to the programme, with the Treasury paying 50% of salaries for the first month after people return to work, falling to 30% after the third month, with employers picking up the full bill after the fourth.

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