Chancellor Rishi Sunak ‘will stop firms furloughing more staff from August’

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Chancellor Rishi Sunak ‘will stop firms furloughing more staff from August’ as Government looks to flexible working to get Britain ‘back up and running’

  • Chancellor Rishi Sunak expected to announces changes to job retention scheme
  • Firms could be banned from furloughing anymore workers at end of July
  • Companies also expected to pay NI contributions and 20 per cent of salaries
  • Federation of Small Businesses suggested August 1 cut off date ‘would be best’
  • Mr Sunak said Phase Two of the scheme would ‘help get us back up and running’

By William Cole For Mailonline

Published: | Updated:

Rishi Sunak is set to announce that companies will soon be banned from putting anymore employees into the Government’s furlough scheme in plans to get Britain back to work, it is claimed.

The Chancellor will this week lay out the second stage of his plans to help businesses come off Government financial support and get the country ‘back up and running’.

New details are also expected to be revealed over how companies’ contributions to employee wages – of which 80 per cent are currently paid by the Treasury – will change as some firms bring back staff part time from August.

But to prevent companies from furloughing workers currently working full-time and then bring them back part-time, the Treasury is looking to impose a cut-off date for employees to be put on the scheme.

The Treasury is believed to have considered the risk that employers could attempt to furlough millions more workers if the changes were announced, but said that the risk should not be exaggerated because the number of furloughed workers was now relatively stable.

The last published figures showed 8m positions had been furloughed, roughly a quarter of the total jobs in the UK.

Mr Sunak today held a video conference call with business owners who had been using the scheme for their employees.

Rishi Sunak is set to announce that companies will soon be banned from putting anymore employees into the Government’s furlough scheme in plans to get Britain back to work

Worst is over, says Bank

The economic chaos caused by the pandemic may be bottoming out, says the Bank of England.

Andy Haldane, chief economist at the central bank, said there were signs of ‘stabilisation and a very modest recovery’.

But he added the first half of the year was ‘ugly’ and it would be some time before the economy returns to its former strength.

It follows the Bank’s publication of a ‘scenario’ earlier this month, in which it warned the economy could shrink 14 per cent in the worst annual slump since 1706.

Mr Haldane said: ‘If we’ve found our floor, and perhaps even nudged up from that floor, that’s a cause for a little bit of cautious optimism.’

‘Great to take the time today to speak to people who’ve used the furlough scheme,’ he said in a post on social media.

‘I listened to business owners fighting to stay open and employees raring to return. This week we’ll launch Phase 2: flexible furloughing which I hope will help get us back up and running.’

Reacting to the claims, Craig Beaumont of the Federation of Small Businesses told the Financial Times that the Government needs to give firms advance warning before putting in place the measure.

‘The vast majority of employers registering for the scheme are SMEs. These struggle with changes, so any ending should be announced in advance so they have time to plan, including those who are entering the scheme now as their business enters difficulty,’ he said.

‘The chancellor shouldn’t announce and pull up the rope ladder at the same time; announcing now for August 1 would be best.’

At the moment, furloughed employees are receiving 80 per cent of their normal pay up to £2,500 a month. The Government then reimburse employers for salaries, employer national insurance contributions and pension contributions.

What is happening to the furlough scheme? 

The multi-billion pound furlough scheme is being extended to October.

Employees on the scheme will continue to receive 80 per cent of wages, up to a ceiling of £2,500 a month.

Until the end of July, there will be no changes to the scheme whatsoever.

From August to October there will be ‘greater flexibility’ so furloughed employees can return to work part-time.

Businesses will be expected to share the costs of paying their salaries from this point – meaning some that remain largely shut will have to choose whether to make people redundant.

Further details of the arrangements will be announced by the end of the month. 

But this could change from August, with Mr Sunak expected to say employers must contribute 20 per cent of salary, with government contributions falling to 60 per cent.

Companies would also be expected to pay NI contributions, draft details show. 

The move comes as business groups are braced for a wave of redundancies through the summer and beyond, as government support schemes are gradually withdrawn. 

The effect of the change could be substantial, with several firms saying they will not be able to pay the share because their employees won’t be back at work. 

One unnamed employee in an office based in London said that 35 out of 42 staff placed on furlough at the beginning of April would be made redundant by the end of June, while another’s employer said that once it had to pick up some of the tab, people would have to go. 

The worker, who has been furloughed since March, was told that because of expected changes to the job retention scheme her position is being made redundant at the end of July. 

The total cost of the furlough scheme could hit £80 billion – the Office for Budget Responsibility has warned – and more than eight million people have been furloughed.