Rishi Sunak races to build 100bn job creation scheme amid fears 2MILLION will lose their jobs


Rishi Sunak is racing to build a £100bn job creation scheme amid fears two million Britons will lose their jobs when the furlough scheme ends.  

During the Downing St press conference the Chancellor promised to address the looming employment crisis with a scheme to create additional jobs.  

Mr Sunak announced that the furlough scheme, which some predict will cost £100bn, would be revamped into ‘flexible furlough’. 

This will enable employees to return as long as companies pick up a percentage of their salary equivalent to the hours they work. 

Ministers told the Financial Times that Mr Sunak and Boris Johnson were working to hatch a plan to prop-up the plummeting employment rate with a stimulus package. 

The furlough scheme currently covers 80 per cent of pay for employees, up to a ceiling of £2,500 a month. Some 8.4million jobs are currently being propped up, to a total value so far of £15billion. 

A handout photo made available by n10 Downing street shows Britain’s Chancellor of the Exchequer Rishi Sunak holding a digital Covid-19 press conference in n10 Downing street in London, Britain, 29 May 2020

‘Now our thoughts, our energy and resources must turn to looking forward to planning for the recovery,’ Mr Sunak said yesterday. 

‘We will develop new ways to grow the economy, to back business, boost skills and help people thrive in the new post-Covid world.’ 

The FT reported that the prime minister had already been mulling over an infrastructure-focussed job creation programme with the cabinet, including ideas on green energy.        

Mr Sunak used the daily Downing Street press conference to set out a major shake up of the furlough scheme as he said businesses must start to share the wage burden from August before the initiative is finally brought to an end in October. 

However, the proportion they will be asked to contribute will be tapered up to a maximum of 20 per cent over the three month period.

The Chancellor stressed the UK scheme would remain ‘among the most generous in the world’, but said businesses should start helping to pay the wage bill of furloughed works despite fears of a wave of redundancies.

What changes has Rishi Sunak announced to the Government’s furlough scheme?

Chancellor Rishi Sunak today announced a major overhaul of the furlough scheme ahead of its planned closure at the end of October. 

Here is how it will work: 

Furloughed workers will continue to receive 80 per cent of their pay up to £2,500 a month until the end of October.

But they will be able to return part-time from July without losing out financially, with businesses told to pay the percentage of wages for the hours worked. 

The Government will pick up the full bill for the furlough scheme until the end of July.  

From August, companies will then have to pay employer national insurance and pensions contributions for those on furlough.

In September, bosses will also have to pay 10 per cent of a furloughed employee’s wages, with the Government covering 70 per cent up to £2,190 per worker. 

The burden on firms will then increase to 20 per cent in October, with the Treasury picking up the remaining 60 per cent up to £1,875.

The Government is adamant the scheme will close at the end of October. 

After an outcry from Tory MPs, he also announced an extension to separate support for the self-employed – with grants continuing until August, but slightly scaled back. 

As the cost of the bailouts soar, Mr Sunak is desperately trying to balance the need to wean companies off government money with keeping the economy on life support during lockdown.    

Under the new framework staff will have the same safety net until October, but firms will have to pick up some of the tab from August.

That month they will need to pay national insurance and pension contributions for their staff on furlough. 

In September that will be expanded to 10 per cent of wages, and then in October it will be 20 per cent before the scheme then closes. 

The Institute for Fiscal Studies think tank said the combined cost of the furlough and self-employment support schemes could now ‘easily breach’ £100 billion.  

Mr Sunak said: ‘Our top priority has always been to support people, protect jobs and businesses through this crisis. The furlough and self-employment schemes have been a lifeline for millions of people and businesses.

‘We stood behind Britain’s businesses and workers as we came into this crisis and we stand behind them as we come through the other side.

‘Now, as we begin to re-open our country and kickstart our economy, these schemes will adjust to ensure those who are able to work can do so, while remaining amongst the most generous in the world.’ 

The maximum 20 per cent – 60 per cent split between the employer and state that Mr Sunak has settled on is lower than the 50 per cent share for businesses that had been previously mooted.   

The Treasury said individual firms will decide the hours and shift patterns for their part-time employees, and be responsible for paying their wages while in work. 

Mr Sunak will hope that the ‘flexible furlough’ scheme and the delayed request for businesses to start sharing the wage burden will help to reduce the number of people who are made redundant, potentially spreading job losses over a longer and more manageable period.

Currently, some 2.3million self-employed people are receiving grants equivalent to 80 per cent of their usual monthly profits, to a ceiling of £2,500. 

Ministers had been indicating until recently that the current round, up to next month, was likely to be the last.   

But Mr Sunak revealed there will be a ‘second and final grant’ in August. 

It will be worth 70 per cent of average monthly trading profits, paid out in a single installment covering three months’ worth of profits, and capped at £6,570 in total. 

Business and union leaders welcomed the Chancellor’s announcements, especially the gradual reduction in furlough contributions from the Treasury. 

British Chambers of Commerce director general Adam Marshall said: ‘The Chancellor has listened to business communities and struck a careful balance that will help many firms bring furloughed staff back to work flexibly over the coming months.’ 

TUC general secretary Frances O’Grady said: ‘We’re glad the Chancellor has listened to unions and allowed employers to start using short-time furlough from July. This will help employers gradually and safely bring people back to work, protect jobs and support the economy to recover.’ 

Dame Carolyn Fairbairn, the CBI’s director general, said: ‘The Government’s support throughout the lockdown so far has been a lifeline for businesses, employees and the self-employed. The changes announced will help ensure the schemes stay effective as we begin a cautious recovery.

UK plc is heading for the worst recession in 300 years, with millions of jobs expected to be lost and the prospects for a quick bounce back unclear. 

Bank of England Governor Andrew Bailey underlined the perilous state of the economy yesterday by raising doubts about the speed of any recovery and making clear a fresh wave of quantitative easing – effectively printing money – will be needed.

The intervention came as new economic indicators showed that just 14 per cent of stalled businesses are expecting to restart their operations over the next fortnight, and they are likely to bring back only 31 per cent of furloughed staff. 

Online job ads have halved between March and May, according to the Office for National Statistics. 

Figures released on Wednesday showed another 400,000 have been furloughed over the past week, with a million employers now putting in for a total of £15billion

Figures released on Wednesday showed another 400,000 have been furloughed over the past week, with a million employers now putting in for a total of £15billion

Since the crisis began in March, the Bank has cut official interest rates to an historic low of 0.1 per cent, announced a £200billion expansion of QE, made moves to ease the financial pressure on large companies and made it easier for banks to lend.

George Eustice, the Environment Secretary, refused to be drawn this morning on what Mr Sunak would announce, but said: ‘Clearly as we start to emerge from the lockdown and start to get our economy back to work we cannot keep people on the furlough scheme indefinitely.

‘We need to identify ways of moving them off the furlough scheme and back to work.’ 

Asked on Sky News whether there will be continued support for the self-employed, Mr Eustice said: ‘Well obviously it is nearly a month ago now that we said we wanted to reopen those bits of the economy that couldn’t work from home, so we’ve been encouraging the construction industry for instance to get back to work.

‘A lot of those self-employed professions such as plumbers, electricians and so on, those people are able to return to work now, albeit observing social distancing, but we need to try to start to get bits of the economy back to work.

‘Now I don’t know what Rishi Sunak, the Chancellor, will say later in terms of self-employed and the furlough scheme for them, but I think there is a general overarching message here that we’ve had a very generous furlough scheme in place to help people through these extraordinary times and to ensure that businesses’ overheads could be covered.’

Rishi Sunak races to build 100bn job creation scheme amid fears 2MILLION will lose their jobs


Rishi Sunak is racing to build a £100bn job creation scheme amid fears two million Britons will lose their jobs when the furlough scheme ends.  

During the Downing St press conference the Chancellor promised to address the looming employment crisis with a scheme to create additional jobs.  

Mr Sunak announced that the furlough scheme, which some predict will cost £100bn, would be revamped into ‘flexible furlough’. 

This will enable employees to return as long as companies pick up a percentage of their salary equivalent to the hours they work. 

Ministers told the Financial Times that Mr Sunak and Boris Johnson were working to hatch a plan to prop-up the plummeting employment rate with a stimulus package. 

The furlough scheme currently covers 80 per cent of pay for employees, up to a ceiling of £2,500 a month. Some 8.4million jobs are currently being propped up, to a total value so far of £15billion. 

A handout photo made available by n10 Downing street shows Britain’s Chancellor of the Exchequer Rishi Sunak holding a digital Covid-19 press conference in n10 Downing street in London, Britain, 29 May 2020

‘Now our thoughts, our energy and resources must turn to looking forward to planning for the recovery,’ Mr Sunak said yesterday. 

‘We will develop new ways to grow the economy, to back business, boost skills and help people thrive in the new post-Covid world.’ 

The FT reported that the prime minister had already been mulling over an infrastructure-focussed job creation programme with the cabinet, including ideas on green energy.        

Mr Sunak used the daily Downing Street press conference to set out a major shake up of the furlough scheme as he said businesses must start to share the wage burden from August before the initiative is finally brought to an end in October. 

However, the proportion they will be asked to contribute will be tapered up to a maximum of 20 per cent over the three month period.

The Chancellor stressed the UK scheme would remain ‘among the most generous in the world’, but said businesses should start helping to pay the wage bill of furloughed works despite fears of a wave of redundancies.

What changes has Rishi Sunak announced to the Government’s furlough scheme?

Chancellor Rishi Sunak today announced a major overhaul of the furlough scheme ahead of its planned closure at the end of October. 

Here is how it will work: 

Furloughed workers will continue to receive 80 per cent of their pay up to £2,500 a month until the end of October.

But they will be able to return part-time from July without losing out financially, with businesses told to pay the percentage of wages for the hours worked. 

The Government will pick up the full bill for the furlough scheme until the end of July.  

From August, companies will then have to pay employer national insurance and pensions contributions for those on furlough.

In September, bosses will also have to pay 10 per cent of a furloughed employee’s wages, with the Government covering 70 per cent up to £2,190 per worker. 

The burden on firms will then increase to 20 per cent in October, with the Treasury picking up the remaining 60 per cent up to £1,875.

The Government is adamant the scheme will close at the end of October. 

After an outcry from Tory MPs, he also announced an extension to separate support for the self-employed – with grants continuing until August, but slightly scaled back. 

As the cost of the bailouts soar, Mr Sunak is desperately trying to balance the need to wean companies off government money with keeping the economy on life support during lockdown.    

Under the new framework staff will have the same safety net until October, but firms will have to pick up some of the tab from August.

That month they will need to pay national insurance and pension contributions for their staff on furlough. 

In September that will be expanded to 10 per cent of wages, and then in October it will be 20 per cent before the scheme then closes. 

The Institute for Fiscal Studies think tank said the combined cost of the furlough and self-employment support schemes could now ‘easily breach’ £100 billion.  

Mr Sunak said: ‘Our top priority has always been to support people, protect jobs and businesses through this crisis. The furlough and self-employment schemes have been a lifeline for millions of people and businesses.

‘We stood behind Britain’s businesses and workers as we came into this crisis and we stand behind them as we come through the other side.

‘Now, as we begin to re-open our country and kickstart our economy, these schemes will adjust to ensure those who are able to work can do so, while remaining amongst the most generous in the world.’ 

The maximum 20 per cent – 60 per cent split between the employer and state that Mr Sunak has settled on is lower than the 50 per cent share for businesses that had been previously mooted.   

The Treasury said individual firms will decide the hours and shift patterns for their part-time employees, and be responsible for paying their wages while in work. 

Mr Sunak will hope that the ‘flexible furlough’ scheme and the delayed request for businesses to start sharing the wage burden will help to reduce the number of people who are made redundant, potentially spreading job losses over a longer and more manageable period.

Currently, some 2.3million self-employed people are receiving grants equivalent to 80 per cent of their usual monthly profits, to a ceiling of £2,500. 

Ministers had been indicating until recently that the current round, up to next month, was likely to be the last.   

But Mr Sunak revealed there will be a ‘second and final grant’ in August. 

It will be worth 70 per cent of average monthly trading profits, paid out in a single installment covering three months’ worth of profits, and capped at £6,570 in total. 

Business and union leaders welcomed the Chancellor’s announcements, especially the gradual reduction in furlough contributions from the Treasury. 

British Chambers of Commerce director general Adam Marshall said: ‘The Chancellor has listened to business communities and struck a careful balance that will help many firms bring furloughed staff back to work flexibly over the coming months.’ 

TUC general secretary Frances O’Grady said: ‘We’re glad the Chancellor has listened to unions and allowed employers to start using short-time furlough from July. This will help employers gradually and safely bring people back to work, protect jobs and support the economy to recover.’ 

Dame Carolyn Fairbairn, the CBI’s director general, said: ‘The Government’s support throughout the lockdown so far has been a lifeline for businesses, employees and the self-employed. The changes announced will help ensure the schemes stay effective as we begin a cautious recovery.

UK plc is heading for the worst recession in 300 years, with millions of jobs expected to be lost and the prospects for a quick bounce back unclear. 

Bank of England Governor Andrew Bailey underlined the perilous state of the economy yesterday by raising doubts about the speed of any recovery and making clear a fresh wave of quantitative easing – effectively printing money – will be needed.

The intervention came as new economic indicators showed that just 14 per cent of stalled businesses are expecting to restart their operations over the next fortnight, and they are likely to bring back only 31 per cent of furloughed staff. 

Online job ads have halved between March and May, according to the Office for National Statistics. 

Figures released on Wednesday showed another 400,000 have been furloughed over the past week, with a million employers now putting in for a total of £15billion

Figures released on Wednesday showed another 400,000 have been furloughed over the past week, with a million employers now putting in for a total of £15billion

Since the crisis began in March, the Bank has cut official interest rates to an historic low of 0.1 per cent, announced a £200billion expansion of QE, made moves to ease the financial pressure on large companies and made it easier for banks to lend.

George Eustice, the Environment Secretary, refused to be drawn this morning on what Mr Sunak would announce, but said: ‘Clearly as we start to emerge from the lockdown and start to get our economy back to work we cannot keep people on the furlough scheme indefinitely.

‘We need to identify ways of moving them off the furlough scheme and back to work.’ 

Asked on Sky News whether there will be continued support for the self-employed, Mr Eustice said: ‘Well obviously it is nearly a month ago now that we said we wanted to reopen those bits of the economy that couldn’t work from home, so we’ve been encouraging the construction industry for instance to get back to work.

‘A lot of those self-employed professions such as plumbers, electricians and so on, those people are able to return to work now, albeit observing social distancing, but we need to try to start to get bits of the economy back to work.

‘Now I don’t know what Rishi Sunak, the Chancellor, will say later in terms of self-employed and the furlough scheme for them, but I think there is a general overarching message here that we’ve had a very generous furlough scheme in place to help people through these extraordinary times and to ensure that businesses’ overheads could be covered.’

Coronavirus UK: Firms must pay some furlough costs from August


Rishi Sunak tonight announced that furloughed staff will be allowed to return to work on a part-time basis from July – a month earlier than originally planned. 

The Chancellor said firms will soon be able to take advantage of what he described as ‘flexible furlough’ which will enable employees to return as long as companies pick up a percentage of their salary equivalent to the hours they work. 

Mr Sunak used the daily Downing Street press conference to set out a major shake up of the furlough scheme as he said businesses must start to share the wage burden from August before the initiative is finally brought to an end in October. 

However, the proportion they will be asked to contribute will be tapered up to a maximum of 20 per cent over the three month period.

The Chancellor stressed the UK scheme would remain ‘among the most generous in the world’, but said businesses should start helping to pay the wage bill of furloughed works despite fears of a wave of redundancies.

After an outcry from Tory MPs, he also announced an extension to separate support for the self-employed – with grants continuing until August, but slightly scaled back. 

As the cost of the bailouts soar, Mr Sunak is desperately trying to balance the need to wean companies off government money with keeping the economy on life support during lockdown.   

The furlough scheme currently covers 80 per cent of pay for employees, up to a ceiling of £2,500 a month. Some 8.4million jobs are currently being propped up, to a total value so far of £15billion.

Under the new framework staff will have the same safety net until October, but firms will have to pick up some of the tab from August.

That month they will need to pay national insurance and pension contributions for their staff on furlough. 

In September that will be expanded to 10 per cent of wages, and then in October it will be 20 per cent before the scheme then closes. 

Chancellor Rishi Sunak (pictured in Downing Street tonight) has declared that businesses should start taking some of the burden despite fears of a wave of redundancies

Mr Sunak said: ‘Our top priority has always been to support people, protect jobs and businesses through this crisis. The furlough and self-employment schemes have been a lifeline for millions of people and businesses.

‘We stood behind Britain’s businesses and workers as we came into this crisis and we stand behind them as we come through the other side.

‘Now, as we begin to re-open our country and kickstart our economy, these schemes will adjust to ensure those who are able to work can do so, while remaining amongst the most generous in the world.’ 

The maximum 20 per cent – 60 per cent split between the employer and state that Mr Sunak has settled on is lower than the 50 per cent share for businesses that had been previously mooted.   

The Treasury said individual firms will decide the hours and shift patterns for their part-time employees, and be responsible for paying their wages while in work. 

Another 2.3million self-employed are receiving grants equivalent to 80 per cent of their usual monthly profits, to a ceiling of £2,500. 

Ministers had been indicating until recently that the current round, up to next month, was likely to be the last.   

But Mr Sunak revealed there will be a ‘second and final grant’ in August. 

It will be worth 70 per cent of average monthly trading profits, paid out in a single installment covering three months’ worth of profits, and capped at £6,570 in total. 

Business and union leaders welcomed the Chancellor’s announcements, especially the gradual reduction in furlough contributions from the Treasury. 

British Chambers of Commerce director general Adam Marshall said: ‘The Chancellor has listened to business communities and struck a careful balance that will help many firms bring furloughed staff back to work flexibly over the coming months.’ 

TUC general secretary Frances O’Grady said: ‘We’re glad the Chancellor has listened to unions and allowed employers to start using short-time furlough from July. This will help employers gradually and safely bring people back to work, protect jobs and support the economy to recover.’ 

Dame Carolyn Fairbairn, the CBI’s director general, said: ‘The Government’s support throughout the lockdown so far has been a lifeline for businesses, employees and the self-employed. The changes announced will help ensure the schemes stay effective as we begin a cautious recovery.

UK plc is heading for the worst recession in 300 years, with millions of jobs expected to be lost and the prospects for a quick bounce back unclear. 

Bank of England Governor Andrew Bailey underlined the perilous state of the economy yesterday by raising doubts about the speed of any recovery and making clear a fresh wave of quantitative easing – effectively printing money – will be needed.

The intervention came as new economic indicators showed that just 14 per cent of stalled businesses are expecting to restart their operations over the next fortnight, and they are likely to bring back only 31 per cent of furloughed staff. 

Online job ads have halved between March and May, according to the Office for National Statistics. 

Figures released on Wednesday showed another 400,000 have been furloughed over the past week, with a million employers now putting in for a total of £15billion

Figures released on Wednesday showed another 400,000 have been furloughed over the past week, with a million employers now putting in for a total of £15billion

Since the crisis began in March, the Bank has cut official interest rates to an historic low of 0.1 per cent, announced a £200billion expansion of QE, made moves to ease the financial pressure on large companies and made it easier for banks to lend.

George Eustice, the Environment Secretary, refused to be drawn this morning on what Mr Sunak would announce, but said: ‘Clearly as we start to emerge from the lockdown and start to get our economy back to work we cannot keep people on the furlough scheme indefinitely.

‘We need to identify ways of moving them off the furlough scheme and back to work.’ 

Asked on Sky News whether there will be continued support for the self-employed, Mr Eustice said: ‘Well obviously it is nearly a month ago now that we said we wanted to reopen those bits of the economy that couldn’t work from home, so we’ve been encouraging the construction industry for instance to get back to work.

‘A lot of those self-employed professions such as plumbers, electricians and so on, those people are able to return to work now, albeit observing social distancing, but we need to try to start to get bits of the economy back to work.

‘Now I don’t know what Rishi Sunak, the Chancellor, will say later in terms of self-employed and the furlough scheme for them, but I think there is a general overarching message here that we’ve had a very generous furlough scheme in place to help people through these extraordinary times and to ensure that businesses’ overheads could be covered.’

Coronavirus UK: Firms must pay some furlough costs from August


Firms must start paying furlough costs for staff from this August, Rishi Sunak declared tonight – but the proportion they contribute will be tapered up to 20 per cent over three months.

The Chancellor stressed that the UK scheme would remain ‘among the most generous in the world’, but said businesses should start taking some of the burden from the summer despite fears of a wave of redundancies.

After an outcry from Tory MPs, he also announced an extension to separate support for the self-employed – with grants continuing until August, but slightly scaled back. 

As the cost of the bailouts soar, Mr Sunak is desperately trying to balance the need to wean companies off government money with keeping the economy on life support during lockdown.   

The furlough scheme currently covers 80 per cent of pay for employees, up to a ceiling of £2,500 a month. Some 8.4million jobs are currently being propped up, to a total value so far of £15billion.

Under the new framework staff will have the same safety net until October, but firms will have to pick up some of the tab from August.

That month they will need to pay national insurance and pension contributions for their staff on furlough. In September that will be expanded to 10 per cent of wages, and then in October it will be 20 per cent.

Mr Sunak also announced that from July – a month earlier than signalled before – firms will be able to take advantage of ‘flexible furlough’. 

This will allow them to bring back employees on a part-time basis, as long as they pick up a percentage of their salary equivalent to the hours they work. 

Mr Sunak said: ‘Our top priority has always been to support people, protect jobs and businesses through this crisis. The furlough and self-employment schemes have been a lifeline for millions of people and businesses.

‘We stood behind Britain’s businesses and workers as we came into this crisis and we stand behind them as we come through the other side.

‘Now, as we begin to re-open our country and kickstart our economy, these schemes will adjust to ensure those who are able to work can do so, while remaining amongst the most generous in the world.’ 

Chancellor Rishi Sunak (pictured in Downing Street tonight) has declared that businesses should start taking some of the burden despite fears of a wave of redundancies

The maximum 20 per cent -60 per cent split between the employer and state that Mr Sunak has settled on is lower than the 50 per cent share for businesses that had been previously mooted.   

The Treasury said individual firms will decide the hours and shift patterns for their part-time employees, and be responsible for paying their wages while in work. 

Another 2.3million self-employed are receiving grants equivalent to 80 per cent of their usual monthly profits, to a ceiling of £2,500. 

Ministers had been indicating until recently that the current round, up to next month, was likely to be the last.   

But Mr Sunak revealed there will be a ‘second and final grant’ in August. 

It will be worth 70 per cent of average monthly trading profits, paid out in a single installment covering three months’ worth of profits, and capped at £6,570 in total. 

UK plc is heading for the worst recession in 300 years, with millions of jobs expected to be lost and the prospects for a quick bounce back unclear. 

Bank of England Governor Andrew Bailey underlined the perilous state of the economy yesterday by raising doubts about the speed of any recovery and making clear a fresh wave of quantitative easing – effectively printing money – will be needed.

The intervention came as new economic indicators showed that just 14 per cent of stalled businesses are expecting to restart their operations over the next fortnight, and they are likely to bring back only 31 per cent of furloughed staff. 

Online job ads have halved between March and May, according to the Office for National Statistics. 

Since the crisis began in March, the Bank has cut official interest rates to an historic low of 0.1 per cent, announced a £200billion expansion of QE, made moves to ease the financial pressure on large companies and made it easier for banks to lend.

George Eustice, the Environment Secretary, refused to be drawn this morning on what Mr Sunak would announce, but said: ‘Clearly as we start to emerge from the lockdown and start to get our economy back to work we cannot keep people on the furlough scheme indefinitely.

‘We need to identify ways of moving them off the furlough scheme and back to work.’ 

Figures released on Wednesday showed another 400,000 have been furloughed over the past week, with a million employers now putting in for a total of £15billion

Figures released on Wednesday showed another 400,000 have been furloughed over the past week, with a million employers now putting in for a total of £15billion

Asked on Sky News whether there will be continued support for the self-employed, Mr Eustice said: ‘Well obviously it is nearly a month ago now that we said we wanted to reopen those bits of the economy that couldn’t work from home, so we’ve been encouraging the construction industry for instance to get back to work.

‘A lot of those self-employed professions such as plumbers, electricians and so on, those people are able to return to work now, albeit observing social distancing, but we need to try to start to get bits of the economy back to work.

‘Now I don’t know what Rishi Sunak, the Chancellor, will say later in terms of self-employed and the furlough scheme for them, but I think there is a general overarching message here that we’ve had a very generous furlough scheme in place to help people through these extraordinary times and to ensure that businesses’ overheads could be covered.’

Firms must pay 20 per cent of wages for furloughed staff from August


Firms must pay 20 per cent of wages for furloughed staff from August, Rishi Sunak will say today as he starts to wind down massive bailout despite fears of a wave of redundancies

  • Rishi Sunak is announcing the details of furlough scheme changes after August 
  • The Chancellor is set to say firms will have to pick up 20 per cent of furlough pay 
  • Companies have warned of a wave of redundancies as the support is scaled back
  • Here’s how to help people impacted by Covid-19

Firms must pay 20 per cent of wages for furloughed staff from August, Rishi Sunak will say today as he starts to wind down the government’s massive coronavirus bailouts.

The Chancellor will declare that businesses should start taking some of the burden despite fears of a wave of redundancies.

He is also expected to give details of the future of separate support for the self-employed – with signs the grants might be partly extended beyond next month.

Environment Secretary George Eustice warned in a round of interviews this morning that people cannot be furloughed ‘indefinitely’ must find way to get back to work safely. 

As the cost of the bailouts soar towards £100billion, Mr Sunak is desperately trying to balance the need to wean companies off government money will keeping the economy on life support during lockdown.

UK plc is heading for the worst recession in 300 years, with millions of jobs expected to be lost and the prospects for a quick bounceback unclear. 

The furlough scheme currently covers 80 per cent of pay for employees, up to a ceiling of £2,500 a month.

Mr Sunak has already announced that workers will have the same safety net until October, but said firms will have to pick up some of the tab.

Chancellor Rishi Sunak (pictured in Downing Street last night) will declare that businesses should start taking some of the burden despite fears of a wave of redundancies

Figures released on Wednesday showed another 400,000 have been furloughed over the past week, with a million employers now putting in for a total of £15billion

Figures released on Wednesday showed another 400,000 have been furloughed over the past week, with a million employers now putting in for a total of £15billion

The 20 per cent  – 60 per cent split between the employer and state that the Treasury is understood to have settled on is lower than the 50 per cent share for businesses that had been previously mooted.

Earlier this week it emerged the government is now propping up a third of the workforce, with 8.4million jobs on furlough, to a total value so far of £15billion.

Another 2.3million self-employed are receiving grants equivalent to 80 per cent of their usual monthly income, to a ceiling of £2,500.   

Bank of England Governor Andrew Bailey underlined the perilous state of the economy yesterday by raising doubts about the speed of any recovery and making clear a fresh wave of quantitative easing – effectively printing money – will be needed.

The intervention came as new economic indicators showed that just 14 per cent of stalled businesses are expecting to restart their operations over the next fortnight, and they are likely to bring back only 31 per cent of furloughed staff. 

Online job ads have halved between March and May, according to the Office for National Statistics. 

Environment Secretary George Eustice warned in a round of interviews this morning that people cannot be furloughed 'indefinitely' must find way to get back to work safely

Environment Secretary George Eustice warned in a round of interviews this morning that people cannot be furloughed ‘indefinitely’ must find way to get back to work safely

Since the crisis began in March, the Bank has cut official interest rates to an historic low of 0.1 per cent, announced a £200billion expansion of QE, made moves to ease the financial pressure on large companies and made it easier for banks to lend.

Mr Eustice refused to be drawn this morning on what Mr Sunak will announce, but said: ‘Clearly as we start to emerge from the lockdown and start to get our economy back to work we cannot keep people on the furlough scheme indefinitely.

‘We need to identify ways of moving them off the furlough scheme and back to work.’ 

Asked on Sky News whether there will be continued support for the self-employed, Mr Eustice said: ‘Well obviously it is nearly a month ago now that we said we wanted to reopen those bits of the economy that couldn’t work from home, so we’ve been encouraging the construction industry for instance to get back to work.

‘A lot of those self-employed professions such as plumbers, electricians and so on, those people are able to return to work now, albeit observing social distancing, but we need to try to start to get bits of the economy back to work.

‘Now I don’t know what Rishi Sunak, the Chancellor, will say later in terms of self-employed and the furlough scheme for them, but I think there is a general overarching message here that we’ve had a very generous furlough scheme in place to help people through these extraordinary times and to ensure that businesses’ overheads could be covered.’

Firms must pay 20 per cent of wages for furloughed staff from August


Firms must pay 20 per cent of wages for furloughed staff from August, Rishi Sunak will say today as he starts to wind down massive bailout despite fears of a wave of redundancies

  • Rishi Sunak is announcing the details of furlough scheme changes after August 
  • The Chancellor is set to say firms will have to pick up 20 per cent of furlough pay 
  • Companies have warned of a wave of redundancies as the support is scaled back
  • Here’s how to help people impacted by Covid-19

Firms must pay 20 per cent of wages for furloughed staff from August, Rishi Sunak will say today as he starts to wind down the government’s massive coronavirus bailouts.

The Chancellor will declare that businesses should start taking some of the burden despite fears of a wave of redundancies.

He is also expected to give details of the future of separate support for the self-employed – with signs the grants might be partly extended beyond next month.

Environment Secretary George Eustice warned in a round of interviews this morning that people cannot be furloughed ‘indefinitely’ must find way to get back to work safely. 

As the cost of the bailouts soar towards £100billion, Mr Sunak is desperately trying to balance the need to wean companies off government money will keeping the economy on life support during lockdown.

UK plc is heading for the worst recession in 300 years, with millions of jobs expected to be lost and the prospects for a quick bounceback unclear. 

The furlough scheme currently covers 80 per cent of pay for employees, up to a ceiling of £2,500 a month.

Mr Sunak has already announced that workers will have the same safety net until October, but said firms will have to pick up some of the tab.

Chancellor Rishi Sunak (pictured in Downing Street last night) will declare that businesses should start taking some of the burden despite fears of a wave of redundancies

Figures released on Wednesday showed another 400,000 have been furloughed over the past week, with a million employers now putting in for a total of £15billion

Figures released on Wednesday showed another 400,000 have been furloughed over the past week, with a million employers now putting in for a total of £15billion

The 20 per cent  – 60 per cent split between the employer and state that the Treasury is understood to have settled on is lower than the 50 per cent share for businesses that had been previously mooted.

Earlier this week it emerged the government is now propping up a third of the workforce, with 8.4million jobs on furlough, to a total value so far of £15billion.

Another 2.3million self-employed are receiving grants equivalent to 80 per cent of their usual monthly income, to a ceiling of £2,500.   

Bank of England Governor Andrew Bailey underlined the perilous state of the economy yesterday by raising doubts about the speed of any recovery and making clear a fresh wave of quantitative easing – effectively printing money – will be needed.

The intervention came as new economic indicators showed that just 14 per cent of stalled businesses are expecting to restart their operations over the next fortnight, and they are likely to bring back only 31 per cent of furloughed staff. 

Online job ads have halved between March and May, according to the Office for National Statistics. 

Environment Secretary George Eustice warned in a round of interviews this morning that people cannot be furloughed 'indefinitely' must find way to get back to work safely

Environment Secretary George Eustice warned in a round of interviews this morning that people cannot be furloughed ‘indefinitely’ must find way to get back to work safely

Since the crisis began in March, the Bank has cut official interest rates to an historic low of 0.1 per cent, announced a £200billion expansion of QE, made moves to ease the financial pressure on large companies and made it easier for banks to lend.

Mr Eustice refused to be drawn this morning on what Mr Sunak will announce, but said: ‘Clearly as we start to emerge from the lockdown and start to get our economy back to work we cannot keep people on the furlough scheme indefinitely.

‘We need to identify ways of moving them off the furlough scheme and back to work.’ 

Asked on Sky News whether there will be continued support for the self-employed, Mr Eustice said: ‘Well obviously it is nearly a month ago now that we said we wanted to reopen those bits of the economy that couldn’t work from home, so we’ve been encouraging the construction industry for instance to get back to work.

‘A lot of those self-employed professions such as plumbers, electricians and so on, those people are able to return to work now, albeit observing social distancing, but we need to try to start to get bits of the economy back to work.

‘Now I don’t know what Rishi Sunak, the Chancellor, will say later in terms of self-employed and the furlough scheme for them, but I think there is a general overarching message here that we’ve had a very generous furlough scheme in place to help people through these extraordinary times and to ensure that businesses’ overheads could be covered.’

Employers will have to pay a quarter of furloughed staff’s wages from August


Employers will have to pay a quarter of furloughed staff’s wages from August, Chancellor Rishi Sunak is expected to announce

  • Rishi Sunak will ask businesses to pay 25 per cent of furlough money for staff
  • Chancellor is expected to make radical announcement today or this weekend
  • It comes as 8.4 million workers are now furloughed to cost of £15bn to date
  • Britain faces the biggest economic nosedive of the industrial period – since 1709 

A quarter of the wages of furloughed staff will be paid by employers from August, Rishi Sunak is expected to announce imminently. 

The Chancellor will ask businesses to contribute 25 per cent of the wages paid through the government’s furlough scheme unveiled in March. 

He will also explain how people will be able to work part-time while still having their wages part-paid by his Job Retention Scheme.

Mr Sunak is expected to make the announcement either today or over the weekend as the government seeks to restart the engines of UK plc.

It comes as 8.4 million workers are now furloughed to a cost of £15billion to date, according to data provided by HM Revenue & Customs. 

A quarter of the wages of furloughed staff will be paid by employers from August (pictured, closed shops in a deserted Carnaby Street in central London)

Chancellor Rishi Sunak will ask businesses to contribute 25 per cent of the government's furlough scheme unveiled at the start of lockdown

Chancellor Rishi Sunak will ask businesses to contribute 25 per cent of the government’s furlough scheme unveiled at the start of lockdown 

From August, employers must contribute one quarter of the furlough scheme, in which 80 per cent of wages for workers are paid by the state. 

Mr Sunak’s radical scheme will be closed to new entrants from the end of June, according to Treasury plans seen by The Daily Telegraph. 

All employers will be required to make the payments if they continue to furlough their staff, regardless of whether their business has been allowed to open. 

Over two million self-employed workers are also receiving grants to cover income lost through the disruption caused by the pandemic.

More than one in three private sector workers are now being paid by the state.

The Chancellor recently warned that Britain is facing a ‘severe recession’ and warned that lockdown is having a ‘severe impact’ on the economy. 

Mr Sunak is expected to make the announcement either today or over the weekend as the government seeks to restart the engines of UK plc (pictured, shops in Slough)

Mr Sunak is expected to make the announcement either today or over the weekend as the government seeks to restart the engines of UK plc (pictured, shops in Slough)

The Office for National Statistics said borrowing was up £51.1billion on the same month in 2019

The Office for National Statistics said borrowing was up £51.1billion on the same month in 2019

All employers will be required to make the payments if they continue to furlough their staff, regardless of whether their business has been allowed to open

All employers will be required to make the payments if they continue to furlough their staff, regardless of whether their business has been allowed to open

His claims have been echoed by economic analysts who in early April estimated that lockdown has costed Britain around £2.4billion per day.

The Bank of England forecast this month a 30 per cent contraction of GDP in the next quarter before potentially rising by 15 per cent by late 2020.

Bank staff believe this would represent the biggest nosedive of the industrial period, equivalent to the agrarian Great Frost crisis 300 years ago. 

Mr Sunak has extended the Job Retention Scheme until the end of October, though he said it would be altered in August to encourage people to return to work. 

Over two million self-employed workers are also receiving grants to cover income lost through the disruption caused by the pandemic

Over two million self-employed workers are also receiving grants to cover income lost through the disruption caused by the pandemic

The figures appear to be even worse than the doomladen estimates produced by the independent OBR watchdog last week

The figures appear to be even worse than the doomladen estimates produced by the independent OBR watchdog last week

The Chancellor told MPs: ‘We are in deep consultation with both unions and business groups to make sure we get the design of the second part of this scheme right.

‘I think it is right both for the economy and, indeed, for the taxpayer to ask employers to make a contribution.

‘They will have the benefit of flexible furloughing to help offset that.’ 

This week, the government vowed not to increase income tax, VAT or national insurance despite coronavirus wreaking havoc on the public finances. 

Boris Johnson also promised that the triple lock on state pensions – which means they rise by the highest of inflation, earnings, or 2.5 per cent – would be maintained. 

Employers will have to pay a quarter of furloughed staff’s wages from August


Employers will have to pay a quarter of furloughed staff’s wages from August, Chancellor Rishi Sunak is expected to announce

  • Rishi Sunak will ask businesses to pay 25 per cent of furlough money for staff
  • Chancellor is expected to make radical announcement today or this weekend
  • It comes as 8.4 million workers are now furloughed to cost of £15bn to date
  • Britain faces the biggest economic nosedive of the industrial period – since 1709 

A quarter of the wages of furloughed staff will be paid by employers from August, Rishi Sunak is expected to announce imminently. 

The Chancellor will ask businesses to contribute 25 per cent of the wages paid through the government’s furlough scheme unveiled in March. 

He will also explain how people will be able to work part-time while still having their wages part-paid by his Job Retention Scheme.

Mr Sunak is expected to make the announcement either today or over the weekend as the government seeks to restart the engines of UK plc.

It comes as 8.4 million workers are now furloughed to a cost of £15billion to date, according to data provided by HM Revenue & Customs. 

A quarter of the wages of furloughed staff will be paid by employers from August (pictured, closed shops in a deserted Carnaby Street in central London)

Chancellor Rishi Sunak will ask businesses to contribute 25 per cent of the government's furlough scheme unveiled at the start of lockdown

Chancellor Rishi Sunak will ask businesses to contribute 25 per cent of the government’s furlough scheme unveiled at the start of lockdown 

From August, employers must contribute one quarter of the furlough scheme, in which 80 per cent of wages for workers are paid by the state. 

Mr Sunak’s radical scheme will be closed to new entrants from the end of June, according to Treasury plans seen by The Daily Telegraph. 

All employers will be required to make the payments if they continue to furlough their staff, regardless of whether their business has been allowed to open. 

Over two million self-employed workers are also receiving grants to cover income lost through the disruption caused by the pandemic.

More than one in three private sector workers are now being paid by the state.

The Chancellor recently warned that Britain is facing a ‘severe recession’ and warned that lockdown is having a ‘severe impact’ on the economy. 

Mr Sunak is expected to make the announcement either today or over the weekend as the government seeks to restart the engines of UK plc (pictured, shops in Slough)

Mr Sunak is expected to make the announcement either today or over the weekend as the government seeks to restart the engines of UK plc (pictured, shops in Slough)

The Office for National Statistics said borrowing was up £51.1billion on the same month in 2019

The Office for National Statistics said borrowing was up £51.1billion on the same month in 2019

All employers will be required to make the payments if they continue to furlough their staff, regardless of whether their business has been allowed to open

All employers will be required to make the payments if they continue to furlough their staff, regardless of whether their business has been allowed to open

His claims have been echoed by economic analysts who in early April estimated that lockdown has costed Britain around £2.4billion per day.

The Bank of England forecast this month a 30 per cent contraction of GDP in the next quarter before potentially rising by 15 per cent by late 2020.

Bank staff believe this would represent the biggest nosedive of the industrial period, equivalent to the agrarian Great Frost crisis 300 years ago. 

Mr Sunak has extended the Job Retention Scheme until the end of October, though he said it would be altered in August to encourage people to return to work. 

Over two million self-employed workers are also receiving grants to cover income lost through the disruption caused by the pandemic

Over two million self-employed workers are also receiving grants to cover income lost through the disruption caused by the pandemic

The figures appear to be even worse than the doomladen estimates produced by the independent OBR watchdog last week

The figures appear to be even worse than the doomladen estimates produced by the independent OBR watchdog last week

The Chancellor told MPs: ‘We are in deep consultation with both unions and business groups to make sure we get the design of the second part of this scheme right.

‘I think it is right both for the economy and, indeed, for the taxpayer to ask employers to make a contribution.

‘They will have the benefit of flexible furloughing to help offset that.’ 

This week, the government vowed not to increase income tax, VAT or national insurance despite coronavirus wreaking havoc on the public finances. 

Boris Johnson also promised that the triple lock on state pensions – which means they rise by the highest of inflation, earnings, or 2.5 per cent – would be maintained. 

One-in-four UK firms warn of layoffs when furlough scheme is scaled back in August 


One in four companies say they will be not be able to pay a fifth or more of full-time workers’ salaries between August and October and would have to lay off employees, a poll has found.

Research by the Institute of Directors revealed today shows that firms are worried about being able to keep staff on if they are forced to contribute to 20 per cent of wage bills and pay National Insurance contributions.

The Institute has urged Chancellor Rishi Sunak to make the scheme as flexible as possible to save jobs – as is the intent of the furlough scheme.

Jonathan Geldart, of the Institute, said: ‘Business leaders know that the Government’s support can’t be infinite, but the ugly truth is that if there’s no money coming in the door, many firms will be forced to make difficult decisions come August.’

The number of jobs being bailed out by the government during lockdown has hit a new high of 8.4million – plus 2.3million self-employed.

The Institute of Directors has urged Chancellor Rishi Sunak to make the furlough scheme as flexible as possible to save jobs amid fears thousands of employees could be laid off when firms are told to contribute towards salaries

Critics are concerned the scheme is being used by some firms as a ‘waiting room’ for unemployment, with many furloughed workers set to be axed.

A string of major companies, including British Airways, Virgin Atlantic and Rolls Royce have announced brutal job cuts, just weeks after furloughing staff.

Yesterday, as Prime Minister Boris Johnson gave evidence to senior MPs on the coronavirus crisis, the transport committee’s chairman Huw Merriman asked him: ‘Why is this furlough scheme is called the Job Retention Scheme when companies like BA can put their employees on furlough and then put them under threat of redundancy at the same time?’

Mr Johnson replied: ‘I won’t go into individual companies, but I am concerned about the way some companies are treating their workforce.

‘People should not be using furlough cynically to keep people on their books and then get rid of them. We want people back in jobs.’

New figures showed another 400,000 have been furloughed over the past week, with a million employers now putting in for a total of £15billion

New figures showed another 400,000 have been furloughed over the past week, with a million employers now putting in for a total of £15billion

Almost half of the workers in the UK are now on the Government’s payroll, with the total bill for subsidising millions of jobs in the private sector increasing by £650million every day.

Official figures published yesterday revealed the mounting cost of ministers’ efforts to prevent mass unemployment.

Yesterday the Prime Minister warned companies against using the furlough scheme ‘cynically’ to keep staff on their books before axing them.

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.’

The official figures show almost 11million private sector workers – around four in ten of the total – are now receiving taxpayer support from either the Job Retention Scheme or the Self Employment Income Support Scheme at a cost of almost £22billion so far.

Over the last week, another 700,000 employees and self-employed workers have been signed up for these state subsidies, adding £4.6billion to the bill.

The latest surge in claims means there are now more than 16million people in total on the Government’s payroll, including 5.4million public workers.

This is almost half the 33million people currently employed in the UK, according to Office for National Statistics.

There are growing concerns about the costs to taxpayers and what happens when Government support is withdrawn.

Chancellor Rishi Sunak is expected to announce reforms this week to keep a lid on rising costs, and ensure employers foot more of the bill.

He is expected to bar companies from furloughing more staff from August.

He is also preparing to reveal how much employers will have to start paying towards the wages of furloughed staff. 

Currently they receive 80 per cent of their wages up to a maximum of £2,500 per month from the state, and the employer can top this up if they choose.

Jonathan Geldart, of the Institute of Directors, warned that many firms will be 'forced to make difficult decisions come August'

Jonathan Geldart, of the Institute of Directors, warned that many firms will be ‘forced to make difficult decisions come August’

Under draft plans they would have to start paying a fifth of wages from August 1, meaning the Government contribution would fall to 60 per cent.

At the Liaison Committee yesterday, Mr Johnson suggested he would bring a coronavirus economic recovery package before Parliament before the Commons rises on July 21. 

The PM vowed not to increase income tax, VAT or national insurance despite coronavirus wreaking havoc on the public finances. 

He also promised that the triple lock on state pensions – which means they rise by the highest of inflation, earnings, or 2.5 per cent – would be maintained. 

Standing by the pledges, Mr Johnson told senior MPs: ‘We are going to meet all of our manifesto commitments.’ 

He told the cross-party committee his desire was to ‘keep taxes as low as we possibly can consistent with our desire to invest in our fantastic public services’. 

How WILL we ever pay for it all? Our City Editor – who has reported on every economic crisis since the 1970s – analyses the stark decisions faced by the Chancellor

ByAlex Brummer for the Daily Mail

The scale of Britain’s borrowing and debt binge caused by the Covid-19 lockdown has never been greater. Last month borrowing rocketed to £62.1billion.

That number should start to ease down as people return to work and the nation’s shops open. Nevertheless, Britain, like much of the advanced world, is staring at a deficit and debt abyss this year.

Borrowing is projected by the authoritative Institute for Fiscal Studies (IFS) to hit 15 per cent of total national output, which is more than at the time of the financial crisis, and the greatest level since the Second World War – although that is below the wartime peak.

In the short period from April 1 to May 19 the Debt Management Office issued a staggering £90.2bn of gilt-edged stock to help finance Chancellor of the Exchequer Rishi Sunak schemes

In the short period from April 1 to May 19 the Debt Management Office issued a staggering £90.2bn of gilt-edged stock to help finance Chancellor of the Exchequer Rishi Sunak schemes

Britain’s outstanding debt is already at nearly 100 per cent of national income and the Office for Budget Responsibility (OBR) reckons it is heading for around 110 per cent, undoing much of the good work of more than a decade of budgetary restraint.

In the short period from April 1 to May 19 the Debt Management Office (DMO) issued a staggering £90.2billion of gilt-edged stock – Government bonds, or IOUs – to help finance Chancellor of the Exchequer Rishi Sunak’s vastly expensive jobs furlough scheme, and to compensate for the loss of tax revenues.

That represents 41 per centof the £220billion that the DMO, an outpost of the Treasury, intends to issue between April and July. 

In case the DMO fails to haul in cash from gilt sales quickly enough to pay the bills, the Treasury has asked the Bank of England for an uncapped overdraft facility.

A good appetite for gilts from the Bank, UK domestic investors and overseas means the Treasury has not needed to use the overdraft so far.

But the truth is that a fiscally responsible government cannot allow borrowing and debt to balloon uncontrolled.

Britain’s debt mountain 

  • £62.7bn Borrowing last year
  • £54.8bn Borrowing forecast in March Budget for this year
  • £298.4bn Latest official forecast for borrowing this year
  • £62.1bn Borrowing last month
  • 42% Fall in tax receipts last month
  • 52%  Rise in government spending last month
  •  97.7% – Debt as percentage of GDP
  •  £1,888,000,000,000 Current national debt
  • £2,262,000,000,000 Debt forecast for end of 2020
  • £62.1bn Borrowing last month
  • 42%  Fall in tax receipts last month
  • 52%  Rise in government spending last month 

So the big, still-unanswered question is: how will this ever be paid for if future generations are not to inherit an enormous burden?

Higher Taxes

The monitors at the IFS already have suggested that tax rises are inevitable. But the Tory manifesto for the December 2019 election (remember that?) ruled out any increase in the current Parliament to three of the big tax groups – income tax, national insurance and VAT.

Moreover, if we accept the view of the International Monetary Fund, the Bank of England and the OBR that we are heading into a slump of Great Depression proportions, then hammering the economy with increased taxes on incomes and spending would be economic suicide.

The only feasible tax rises are those on wealth, including housing, fuel (which could be disguised as a green levy) and, possibly, a temporary/emergency surcharge on National Insurance to fund the NHS. This was a device used by Gordon Brown when he served as Chancellor.

Tax relief on pension funds might also be vulnerable. But all of these would be deeply unpopular and it would take great bravery to introduce big tax rises at the present juncture.

Spending Cuts

Public support for austerity is extremely weak after more than a decade of taxpayer sacrifices since the financial crisis.

The Government already is committed to improving funding for the NHS and to deal with financing for social care in the wake of the vast loss of life in the hard-pressed care home sector.

In addition, it is backing a big infrastructure roll-out, from the high-speed rail link from London to the North (HS2), to better roads, bus services and bicycle lanes. 

Higher unemployment levels will also place the Government under pressure to strengthen universal credit and other benefits on a more permanent basis.

Further haircuts on wages and pensions in the public sector look difficult to force through after the role it has played in navigating through coronavirus. The options are extraordinarily narrow.

Britain’s outstanding debt is already at nearly 100 per cent of national income and the Office for Budget Responsibility reckons it is heading for around 110 per cent

Britain’s outstanding debt is already at nearly 100 per cent of national income and the Office for Budget Responsibility reckons it is heading for around 110 per cent

Living with Higher Debt

Britain may be able to sustain higher borrowing and debt levels over the short to medium term (one to five years) provided there is a belief among investors, domestic and global, that there are rules designed to bring down the burden in the long term.

The UK is in the good position of never having defaulted, which means that it enjoys good credit ratings. In contrast, Argentina (with a population of 45m) has defaulted on its debt 11 times in the last century.

It is possible to live with a high level of indebtedness for quite a long time. Japan, since the 1990s, has been able to sustain high debt levels of more than twice national output.

This is because of the willingness of its citizens, institutions and the central bank to buy Japanese government bonds in vast quantities in preference to other savings.

The hope would be that, by not adopting draconian tax rises and public spending cuts, the UK economy could grow sufficiently fast to start shrinking the scale of borrowing and debt as a proportion of GDP.

Such a policy might be tolerable if UK interest rates remain low and if overseas investors – the kindness of strangers – are willing to buy sterling assets.

In the recent past, Norway’s sovereign wealth funds and Middle East potentates have shown themselves willing to put their trust in Her Majesty’s Government.

Wiping out Debt Mountain

New Bank Governor Andrew Bailey raised the volume of QE by £200bn in his first week

New Bank Governor Andrew Bailey raised the volume of QE by £200bn in his first week

Quantitative easing (QE), which occurs when the Bank of England buys Government debt, means that gilt-edged stock can be issued in the knowledge that some of it will be parked on the central bank’s balance sheet.

New Bank Governor Andrew Bailey raised the volume of QE by £200billion in his first week, to help cope with tensions in the financial markets, bringing the UK total to £645billion. 

The suggestion is that it could seek authority for a further £100billion of purchases next month.

The concern is that such steps could stir up future inflation. But analysts say this is different to the causes of hyper-inflation in Zimbabwe, Venezuela and Weimar Republic Germany.

In Britain, the Bank of England is independent of the Government in setting monetary policy, the amount of credit in the financial system. 

The Bank buys gilts in what is called the ‘secondary market’ from banks and insurers, along with specialist gilts brokers. 

So, instead of creating or printing money, the Bank is buying up existing debt at commercial prices.

The declared goal is to sell gilts back into the market when conditions are right, or hold them until maturity.

The big danger occurs if a central bank is required to buy the bonds directly from the Government, which amounts to turning on the printing presses.

The Bank’s independence and a strict inflation target mean that QE is on a tight rein.

Data shows that the Bank of England’s holdings of gilts are at 34 per cent of GDP. 

That is substantial, but it compares with 49 per cent for the European Central Bank, 38 per cent for the Federal Reserve in the US and 115 per cent for the Bank of Japan, so should be sustainable.

Britain’s outstanding debt is already at nearly 100% of national income and the Office for Budget Responsibility reckons it is heading for around 110%

Britain’s outstanding debt is already at nearly 100% of national income and the Office for Budget Responsibility reckons it is heading for around 110%

Conclusion

The UK is not known for making extravagant policy decisions. My belief is that it will adopt a combination of policies to cope with higher borrowing and debt.

The Treasury will outline less stringent fiscal rules, which allow the Chancellor more headroom on borrowing and debt, with a clear path to gentle reductions over this Parliament and the next.

The Bank of England will act as necessary, both to support credit conditions and growth, and to ensure any excess supply of gilts is mopped up.

Should underlying inflation move beyond the 2 per cent target, the Bank of England will disgorge some of its gilts positions, mopping up excess liquidity.

All of this could be blown off course if the UK economy performs extremely badly, provoking a full-blown sterling crisis and a retreat from UK assets.

That is why the markets require the assurance of clear borrowing and debt reduction targets.

Number of jobs furloughed hits 8.4MILLION with another 2.3million self-employed


The number of jobs being bailed out by the government has hit a new high of 8.4million – plus 2.3million self-employed.

New figures showed another 400,000 have been furloughed over the past week, with a million employers now putting in for a total of £15billion. 

Meanwhile, claims under the separate self-employed scheme have risen by 300,000 to 2.3million, with the value reaching £6.8billion. 

The figures were released by the government as it emerged Rishi Sunak is set to bar businesses from furloughing more workers, as part of desperate efforts to wind down the huge coronavirus intervention.

Mr Sunak will also outline this week how much employers will have to pay towards their employees’ wages from August, with expectations they will have to cover around a quarter of the 80 per cent wage subsidy – less than had originally been mooted. 

The moves come amid fears the job retention scheme could cost £80billion by itself, after Mr Sunak said it will stay open until October to prevent a swathe of jobs being axed. The government faces borrowing £300billion this year as lockdown lays waste to the economy and causes the worst recession in 300 years.  

However, businesses have warned the curbs to the bailouts will hit them hard. Tej Parikh, chief economist at the Institute of Directors, said: ‘While the Treasury is keen to reduce its spend on the scheme, for firms that have tried to hold off using it and may now need to, this will be a bitter pill to swallow.

‘As the scheme winds down, other measures to cushion costs will be necessary to support businesses as they try to return to work.’  

New figures showed another 400,000 have been furloughed over the past week, with a million employers now putting in for a total of £15billion

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

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.’

 

The scheme is also being made more flexible to allow employers to bring furloughed workers back part time.

But there are growing concerns about the cost, with the Office for Budget Responsibility estimating it could be as much as £84billion. Already eight million workers have been furloughed, a quarter of UK jobs, at a cost of more than £11billion. HM Revenue & Customs is set to reveal the latest figures this morning.

Under the retention scheme, the Government pays 80 per cent of furloughed workers’ wages, up to £2,500 a month.

From August, Mr Sunak has said he expects employers to pay a contribution towards the costs. Under draft plans, employers would pay a fifth of furloughed workers’ salaries, meaning taxpayers would foot 60 per cent of the wage bill.

This would apply to both full time and part time workers, with employers also expected to pay national insurance contributions.

In return for bowing to demands from employers to allow furloughed workers to return part time, Mr Sunak will ‘close the scheme to new entrants’. The move, reported in the Financial Times, is designed to ensure it is seen as a back-to-work scheme rather than one encouraging employers to reduce staff.

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. 

Critics have expressed concerns the scheme is being used by some firms as a ‘waiting room’ for unemployment, with many furloughed workers set to lose their jobs.

British Airways, Virgin Atlantic and Rolls-Royce have announced job cuts, just weeks after furloughing staff and signing up for taxpayer subsidies. Yesterday supercar maker McLaren became the latest as it announced plans to axe more than a quarter of staff. The Woking-based firm, whose cars can fetch £2million, has been hit hard by the Coronavirus crisis. It has been forced to suspend production and shut down Formula One races.

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

‘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.’  

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.

British Airways, Virgin Atlantic and Rolls-Royce have announced job cuts, just weeks after furloughing staff and signing up for taxpayer subsidies.

Towns will face new local lockdowns: Schools, hospitals and even individual offices could be quarantined if the virus flares up 

By Sophie Borland Health Editor for the Daily Mail 

Schools, hospitals and even  individual offices will be subject to ‘local lockdowns’ under plans to contain flare-ups of coronavirus.

Ministers believe the proposals will allow them to nip any outbreaks of the virus in the bud without having to immobilise the whole country.

Potentially the lockdowns could apply to entire towns but officials hope they will stem any outbreaks much earlier. Families and staff affected will be told to self-isolate for 14 days.

The proposals will form a key part of the NHS’s test-and-trace strategy, the full details of which will be announced by the Health Secretary Matt Hancock later today.

He told the Mail: ‘We are going to hunt down this virus wherever we find it. So far that’s meant a national lockdown, and now we can target that much more.’

Barrow-in-Furness (with 831 confirmed cases per 100,000) has the highest figure both for England and the whole of the UK with Mr Hancock specifically mentioning the town

Barrow-in-Furness (with 831 confirmed cases per 100,000) has the highest figure both for England and the whole of the UK with Mr Hancock specifically mentioning the town

The proposals come as lockdown restrictions begin to be lifted, and after local outbreaks in towns including Weston-super-Mare and Barrow-in-Furness. Mr Hancock continued: ‘NHS test-and-trace will help us move from a national lockdown to local lockdowns where there are flare-ups.

‘So if there is a local flare-up, we will send in a team to work with local public health officials, who will act. This will help us control the virus while carefully and safely lifting the lockdown nationally.’

Sources confirmed schools, care homes and offices affected by the lockdowns would be temporarily closed if needed.

In the case of hospitals, officials would aim to keep some departments open if they were unaffected by the outbreak to ensure minimal disruption to patients.

The test-and-trace strategy will see officials aiming to test as many patients as possible and then trace the spread of the virus while identifying local outbreaks.

Matt Hancock said at Tuesday's Downing Street briefing that individual regions could face 'local lockdowns' if they experience a flare-up in cases

Matt Hancock said at Tuesday’s Downing Street briefing that individual regions could face ‘local lockdowns’ if they experience a flare-up in cases

Back in March, Public Health England suggested regional lockdowns could be applied to towns and cities if they were badly affected by the virus.

But this is the first time ministers have confirmed they would enforce them on schools, hospitals or workplaces as part of a much more targeted approach.

Even before the programme has started they were concerned about this week’s spike in Weston-super-Mare in Somerset, which may have been linked to the VE Day celebrations two weeks ago.

Another flare-up has been identified in Barrow-in-Furness in Cumbria, which local residents have blamed on people flouting social distancing rules.

Mr Hancock said at yesterday’s Downing Street press conference: ‘I know there’s been a specific problem in terms of flare-ups and in terms of the number of cases, particularly in Barrow-in-Furness.

‘We will have local lockdowns in future where there are flare-ups and we have a system that we’re putting in place… to make sure if there is a local flare-up, we have a local lockdown.

‘So local lockdowns will be part of the future system that we put in place as part of the NHS test-and-trace system.’

Earlier in the press conference Mr Hancock was asked why the public should self-isolate for two weeks when they felt perfectly healthy given Mr Cummings had failed to stay at home when he had virus symptoms. The Health Secretary replied: ‘They’re not doing it for me, people are doing this for their loved ones.’