The Treasury has begun to examine how to wind down the Coronavirus Job Retention Scheme once the government eases the lockdown, but chancellor Rishi Sunak has said there will be no “cliff-edge” for businesses where it is brought to end.
The chancellor made the pledge after figures revealed that at least 800,000 employers have so far applied to use the scheme with 6.3m furloughed jobs now covered by the taxpayer.
Under the programme, the government covers 80% of an employees’ wages if they are asked to down tools during the pandemic, or if they are not able to work during the lockdown.
The current round of the programme ends on June 30, but employers and the Labour Party urging the Treasury to extend the scheme in a bid to avoid a wave of redundancies.
Speaking to ITV News, Sunak said: “To anyone who's anxious about this I want to give them reassurance today that there will be no cliff edge to the furlough scheme.”
But he added: “I am working as we speak to figure out the most effective way to wind down the scheme and ease people back into work in a measured way.
“But as some scenarios have suggested we are potentially spending as much on the furlough scheme as we do on the NHS for example. Now clearly that is not a sustainable situation.”
The hint at the end of the furlough scheme came as Labour urged the government to make the scheme “more flexible to manage people’s gradual return to full and part-time work”.
A recent survey of more 1,000 employers by the Chartered Institute for Professional Development (CIPD) found that seven in ten employers who had either used or were planning to use the scheme believed that up to half their staff could work reduced hours if the Treasury allowed them to do so.
CIPD chief Peter Cheese said: “Letting furloughed staff work some hours, where possible, will enable organisations to bring back workers from furlough gradually while rebuilding their business. This will be vital as lockdown measures are eased over a number of weeks or months, and will reduce the risk of large-scale redundancies in this next phase of the crisis. “
Torsten Bell of the Resolution Foundation think tank said the cost of the furlough scheme could now “run into the tens of billions of pounds” based on the latest figures – but he said that represented “a cost very much worth paying”.
The former Labour adviser said: "Even despite mass furloughing, unemployment is still soaring, with over two million new claims for benefits coming though.
“This should remind us how badly needed the retention scheme is, but also that we are likely to be living with the legacy of high unemployment that coronavirus has given Britain, long after it has been phased out.”