Sunak Plans Extension of Pandemic Job Support in U.K. Budget

Chancellor of the Exchequer Rishi Sunak is drawing up plans to extend support for U.K. jobs in the months ahead as the pandemic lockdown continues to damage businesses and threaten a surge in unemployment, according to people familiar with the matter.

The government’s flagship 60 billion-pound ($82 billion) furlough program, paying as much as 80% of workers’ wages, is due to expire at the end of April but Sunak is weighing various options to support jobs into the summer, they said.

The exact form of the measures is expected to be announced in the March 3 budget and will depend on how the Covid-19 pandemic evolves over the six weeks. Boosting employment will be at the center of the budget and “support for jobs isn’t going to end,” one person added.

Another person said extending the furlough program itself is one of the options being considered. The Treasury didn’t immediately reply to a request for comment.

The fact that the government is getting ready to extend state-backed support for jobs is a sign that ministers fear the pandemic will continue to threaten businesses for months to come, with restrictions lifting only gradually as vaccines are rolled out across the country. Deaths and daily cases have reachedrecords this month and the U.K. is at risk of a double dip recession, following its deepest contraction since the Great Frost of 1709.

Sunak is coming under increasing pressure to give workers and company bosses more clarity as they face a series of cliff edges on different coronavirus support offers, including the furlough program, the business rates holiday and the deferral of sales tax bills. Business groups warn of a wave of job losses if the chancellor does not spell out his plans soon for the future of state assistance.

Survival

The Confederation of British Industry on Monday called for an extension of furlough until the end of June and targetedsupport thereafter. That’s backed by UKHospitality, which represents one of industries worst hit by the pandemic, while Trades Union Congress General Secretary Frances O’Grady has called for furlough to be extended until the end of the year.

“Businesses aren’t like light switches, you can’t just switch them on and off and expect them to be at full power when you flick that switch,” British Chambers of Commerce Director General Adam Marshall said in an interview. “It’s going to take them some time to get moving again to reopen and to rebuild their demand. So you don’t want to pull support away too early otherwise you risk losing firms who could come out of this crisis, or you risk weakening those who survive.”

The BCC wants furlough extended until the end of July, with Marshall saying “it’s got to be part of a wider package of cashflow support that helps businesses meet their ongoing fixed costs until such time as they can ramp up again.”

Two of the people familiar with the government’s thinking declined to comment on the fate of the furlough program, which is predicted to cost almost 60 billion pounds by its scheduled closing date of April 30. One person said that all options are on the table, and another said an extension of furlough is still under discussion. Another option is a subsidy for companies that hire workers.

Scrapped Programs

Officials are also still exploring policies similar to the Job Retention Bonus and the Jobs Support Scheme, two programs that were announced last year but then scrapped whenfurlough was extended, according to one of the people. While those programs are unlikely to be deployed in exactly the same form, the underlying thinking — for a gradual tapering of furlough support and to reward firms that retain workers — remains the same.

Under the JSS, companies allowed to reopen would have been able to part-furlough their workers, with the government covering up to 62% of their wages for hours not worked. Companies forced to remain shut would have had to pay pension and national insurance costs for their workers, with the government covering 2/3 of wages. The program had been due to start on Nov. 1, but was canceled the day before, when furlough was extended, with the Treasury saying it “has been postponed until the furlough scheme ends.”

The 9.4-billion pound Job Retention Bonus had been due to pay employers a 1,000-pound grant if they took employees back from furlough and kept them on for at least three months. It, too, was scrapped when furlough was extended, with Sunak saying on Nov. 5 that “we will redeploy a retention incentive at the appropriate time.”

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