Furlough Budget update: Did Rishi Sunak extend furlough? Pledge to ‘help working families’
Sunak says There are no plans to extend furlough in August
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The furlough scheme came into force during the first coronavirus pandemic lockdown in the UK. During this time, millions of Britons were unable to work and earn an income. However, at yesterday’s Budget, Chancellor of the Exchequer Rishi Sunak stood firm in his decision not to bring back the furlough scheme, despite 11-th hour calls from experts. Instead, he pledged to “help working families with the cost of living”.
Speaking in the House of Commons on Wednesday, Mr Sunak applauded the UK’s employment growth since last year.
He said: “In July last year, at the height of the pandemic unemployment was expected to peak at 12 percent.
“Today the Office for Budget Responsibility (OBR) expect unemployment to peak at just 5.2 percent. That means over two million fewer people out of work than previously feared and wages are rising. Compared to February 2020 they have grown in real term to almost three and a half percent.”
Instead, the Budget focussed on grant funding for local Governments, investing more into housing and homeownership, maximising spending for NHS and care services and provide more funding for police and crime services.
Though the scheme came to an end on September 30, 2021, many experts have spoken out about the urgent need for the furlough scheme to be reinstated at Wednesday’s Budget.
Ahead of the Budget announcement, SNP MP Ian Blackford urged the Chancellor to extend the furlough scheme “for as long as the economy is facing lockdown measures”.
He added: “These support mechanisms have to be in place because if we end up in a situation that people are unemployed, and if we end up with a situation where businesses are having to close, then we deepen the problems.
“And given the fact that Government has rightly created the circumstances of lockdown, we need to make sure that that financial support is there for people.”
Experts have also pointed to countries such as Germany, which have permanent schemes in place to shield workers during tough periods.
According to the Organisation for Economic Cooperation and Development (OECD), 23 of its member nations have such schemes in force.
Employment tax director at MHA, Nigel Morris, believes the Government should build on the “success” of the furlough scheme in order to create a “permanent scheme”.
He said: “Furlough was enough of a success that there is definitely merit in the suggestion for the creation of long-term version of it to guard against another pandemic or perhaps a major economic downturn.”
Before furlough came to an end in September, the Liberal Democrats demanded Mr Sunak extended the scheme to 10 of the hardest-hit sectors hardest, including passenger air transport, travel agencies, musical instrument manufacturers and retail sale via stalls and markets.
Despite 11th-hour cries for an extension, the Chancellor pushed ahead with plans to bring the scheme to an end.
But, as COVID-19 case being to rise across the UK, there are some concerns the Prime Minister may move to “Plan B” in order to beat winter infections.
Plan B would see face mask rules reinforced and Britons asked to once again work from home.
Although there is no confirmation of another lockdown, the Prime Minister has warned he has “not ruled it out” if it becomes necessary to protect the NHS and hospitals.
There has been no comment on whether or not the furlough scheme could be reinstated in the future.
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What is the furlough scheme?
The furlough scheme was brought into force to help businesses and employers retain employees during the coronavirus lockdowns which saw many people unable to go to work.
A furloughed worker is someone who remains employed in their regular job but has been told to stop working.
During the support scheme, the Government paid 80 percent of furloughed workers’ wages up to £2,500 a month if they had to stop working due to the pandemic.
However, in July 2021, the Government began to wind down furlough.
This saw employers contributing more towards their employees’ furlough wages, with the Government providing 70 percent of wages up to £2,187.50.
Then, in August, the Government support dropped again to 60 percent, capped at £1,875.
How long did the furlough scheme last?
The furlough scheme came into effect on April 20, 2020, and lasted for a total of 529 days.
The scheme came to an end on September 30, 2021.
Will the furlough scheme be reinstated?
The Government has made no announcement as to whether or not the furlough scheme will be reinstated in the future.
Some experts suggest using the furlough model as a roadmap for a more “permanent” scheme to support employers in the future.
Employment tax director Mr Morris said: “Furlough 2.0 could draw examples of best practices from Europe, where these types of schemes already exist.
“A ‘permanent’ scheme would also help businesses to plan with added assurance, and give confidence to markets and funders should the unthinkable happen again.”
Other expert’s point out that the furlough scheme has served its purpose.
John Bell, director and founder of licensed insolvency practitioners Clarke Bell said: “The Furlough Scheme was a great way of helping a lot of businesses get through the extraordinary circumstances caused by Covid-19, as well as avoiding mass redundancies and unemployment. It is not, however, feasible to keep it going forever – the country simply cannot afford it.
“I think the government is right to have stopped it. Now we need to see how businesses and staff fare over the coming months.
“If things do get worse due to Covid – such as more Covid cases or another lockdown – then this might change. So, no, I do not think the Furlough Scheme should be reinstated now – but the situation should be closely monitored for the foreseeable future.”
At today’s Budget, Mr Sunak said he was committed to “levelling up” and providing “help for working families with the cost of living”.
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