The government’s Coronavirus Job Retention Scheme could begin to wind down from July as lockdown measures are eased.
Chancellor Rishi Sunak is expected to formally outline plans on ending the furlough scheme before the middle of May, as this will be the point employers with more than 100 staff must begin a 45-day consultation period before making any redundancies.
A TV interview with Sunak this week revealed there would be no “cliff edge” at the end of the scheme. He told ITV: “I’m working, as we speak, to figure out the most effective way to wind down the scheme and to ease people back into work in a measured way.”
Reports suggest options for a gradual closure of the scheme could be cutting the 80% subsidy that the government will cover to 60%, and lowering the £2,500 cap on monthly payments. The Treasury is reported to be considering multiple options.
Industry bodies such as the CIPD have lobbied for an extended and more flexible furlough scheme, where employees are allowed to work part time with a smaller state subsidy.
HMRC revealed figures this week showing that a total of 6.3 million jobs have been furloughed since the scheme was launched in April – equivalent to the government subsidising the wages of 23% of jobs.
The furlough scheme has already been extended once, until the end of June. Spending watchdog the Office for Budget Responsibility has estimated that the scheme could cost £42bn over three months if the number of people furloughed reaches 8.3 million.
Alan Lockey, head of the Future of Work Centre at the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA), said earlier this week that making those on furlough permanently redundant would mean unemployment “would rocket to levels not seen since the Great Depression.”
The Institute of Directors has also warned against the government ending support suddenly. Tej Parikh, chief economist at the IoD, said: “Getting the economy running again won’t be like flicking a switch. Even if lockdown measures were completely lifted, many firms wouldn’t expect demand to lift to normal levels immediately.”
Draft guidance on how employers could safely return to work was leaked at the weekend. It considers seven different work environments, including factories, hotels and offices, and the measures they should take regarding cleaning, protective equipment and social distancing.