Rishi Sunak will extend the furlough scheme until the end of March – despite repeatedly claiming that he would do no such thing.
The chancellor revealed that the scheme will continue to pay up to 80 per cent of a person’s wage, up to £2,500 a month. The scheme had been due to end on 31 October.
Sunak told the Commons that his intention was “to give businesses security throughout the winter”, adding that the extension will “protect millions of jobs”.
Not a weakness
It is a major U-turn by the chancellor, and follows furious rows between Westminster and Greater Manchester mayor Andy Burnham over the weaker, 67 per cent emergency wage scheme that areas in tier 3 local lockdowns had faced.
“In the face of such an unprecedented crisis, the government must be flexible to ever-changing circumstances,” Sunak said. “It is not a weakness to be agile and fast-moving in the face of a crisis, but rather a strength and that will not change.”
The chancellor repeatedly refused calls to extend the furlough scheme over the summer, despite warnings that the UK was on the cusp of a catastrophic jobs crisis when it ends.
Nonetheless Sunak has warned that support cannot go on “indefinitely”, warning that “there is hardship ahead for many people”.
The chancellor’s intervention could have the effect of offsetting the immediate pain of a potential no deal Brexit on 31 December. With the government propping up wages through to March, the real jobs cliff edge has been postponed beyond the Brexit deadline.
New stimulus
Earlier on Thursday, the Bank of England announced a fresh £150 billion injection into the economy, and warned that the resurgence of coronavirus would lead to a slower recovery.
The furlough scheme has already cost around £40 billion since it was introduced in March, with roughly 9.6 million people benefitting from it in one way or another.
But it has come under criticism – including from Sunak himself – for simply delaying the inevitable jobs impact of the Covid-19 pandemic, and holding the economy in suspended animation.