Rishi Sunak reveals tapered end to furlough scheme as businesses will have to start paying towards costs

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People on furlough will be allowed to return to work as part of the Government’s plan to bring the massive wage support scheme to an end.

Chancellor Rishi Sunak has announced a tapered end to the furloughing scheme, which is supporting the salaries of more than 8m workers at more than a million companies around the UK. He also announced an extension to the support scheme on offer to the self-employed.

The Government is currently paying up to 80% of wages for furloughed workers up to the end of July. In August companies will be asked to pay National Insurance and pension contributions, followed by 10% of wages in September and 20% in October as the Government reduces support.

The furloughing scheme is widely seen as having prevented millions of redundancies as the business community came to an almost complete halt for the coronavirus lockdown.

But business groups have warned that a sudden ending of the scheme would be disastrous for many companies still unable to trade normally.

Announcing the new measures, 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.”

Under the new measures, employers will from August pay National Insurance and pension contributions, which normally amount to around 5% of employment costs. In September they will be expected to contribute 10% while the Government pays 70%, and in October the Government is asking companies to pay 20% while it pays 60%.

Mr Sunak has also announced an extension to the Self-Employment Income Support Scheme, with a second grant of up to £6,570 made available. So far 2.3m claims have been made to that scheme.

Companies will be allowed to bring staff back to work part-time from July 1, a month earlier than previously allowed, with employers paying staff while in work and having to notify HMRC of the hours staff have returned for.

But there was no mention in Mr Sunak’s announcement of longer help for sectors such as hospitality which are expected to be longest and hardest hit while social distancing measures remain in place.

The announcement has been welcomed by business groups.

Mike Cherry, chairman of the Federation of Small Businesses, said: “The Chancellor has today given thousands of small business owners the certainty they need to plan for the coming months. We’ve always said that extending the JRS and making it more flexible would be key to getting the economy back on its feet.

“By providing employers with the adaptability they’ll require as businesses adjust to a new normal, and bringing forward the flexible furlough launch date, the government is giving hope to small firms right across the UK. Delivery is now key, and new operational systems should be as streamlined as possible.

“Our five million-strong self-employed community will be greatly relieved to know that the income cliff-edge they were facing in two days’ time has now been removed. The hope is that more and more sole traders will be able to return to work safely as restrictions are eased.

“Policymakers have rightly recognised that self-employed business owners working in a lot of sectors – not least hair and beauty, events and travel – will be massively impacted by the current downturn for many weeks to come.”

Adam Marshall, director of the British Chambers of Commerce, said: “The gradual reduction in furlough contributions from the Treasury will give businesses additional time to rebuild their income streams and cash flows, and the decision to give businesses maximum flexibility to bring people back part-time will be appreciated.

“The furlough scheme has helped companies preserve millions of jobs through lockdown, but many firms still face significant uncertainty ahead. On that basis, closing the scheme to new applicants in June feels premature, and risks undermining some of the work already done to preserve businesses and jobs.

“Over the coming months, government will need to be open to providing new and additional support for businesses and staff who are unable to get back to work for an extended period, especially in sectors of the economy facing reduced capacity or demand due to ongoing restrictions.”

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