Furlough 'flip' could mean Government gives wage support to people in work

The Treasury is considering proposals to “flip” the furlough scheme and provide wage support to people in work instead, as Boris Johnson hinted support for some sectors may be available after October.

Sources close to Treasury discussions said officials are examining options to incentivise employers to keep staff in work after the furlough scheme ends.

These include suggestions to switch from the current system of subsidising wages of people who are not working, to instead providing money to employers who put their staff back into work.

Under one option, this could involve covering a proportion of staff wages - likely 10 per cent - for employers in certain sectors who retain staff in their jobs. This would go further than the part-time furlough scheme changes which came in this month.

Alternatively the government could provide cash grants for employers who keep staff on. Another option is to give national insurance holidays for companies hiring staff, although one source said this plan has been abandoned ahead of Wednesday.

The proposals would apply to hardest-hit industries, namely leisure and hospitality, where businesses will not be able to run at full capacity.

Rishi Sunak ran through his planned packet of measures with the Prime Minister in Downing Street on Wednesday. On July 8 he will unveil his economic statement stimulate the economy out of the Covid-induced crisis.

His primary focus will be on stemming unemployment, including youth unemployment. Job guarantees for young people, apprenticeships and skills retraining have been proposed. More details of the government’s infrastructure drive are also expected.

A week after the Chancellor’s statement, the Office for Budget Responsibility, the independent forecaster, will release its latest economic forecasts.

The furlough scheme for all workers is due to end in October. Treasury sources have insisted the Chancellor is against replacing it with a sectoral furlough scheme.

One source said the Treasury still has to “see how the furlough scheme evolves until October” before it can set out next steps.

Temporary cuts to VAT have also been discussed, although industry figures are being told these are now unlikely to be included in Wednesday’s statement.

It comes as the Prime Minister was on Friday challenged by a theatre worker about what she should do when the furlough scheme starts to be run down in August.

Asked directly about what the Government will do to help those in sectors which are prevented from opening Mr Johnson said "we will do so".

Speaking on LBC Radio, he added: "You will be hearing more about what we will be doing to support people next week from the Chancellor Rishi Sunak. We want to make sure we help people throughout the whole crisis".

Torsten Bell, chief executive of the Resolution Foundation, the economic think tank, said the government would be “right to focus policy on the hardest-hit sectors, because they have been most reliant on the furlough scheme to date, and will be the main drivers of job losses in the months ahead.

“Policy needs to be targeted at those sectors to minimise the pain of this recession.”

Josh Hardie, Deputy Director-General of the Confederation of British Industry, said: “The survival of many businesses in hard hit sectors will stay on a knife-edge over the summer as schemes begin to wind down. These firms cannot wait until the autumn for further Government action and so they must continue to be supported during these unprecedented times.”

On Friday Anneliese Dodds, the shadow chancellor, urged the Government to adopt a "targeted strategy" to protect businesses and avoid a "flood of redundancy notices" as the furlough scheme begins to unwind.

Both Mr Johnson and the Chancellor have been keen to stress the current furlough scheme will not be extended past October.

Earlier this week the Prime Minister said it would not be "healthy" for either the economy or workers for the scheme to continue beyond its scheduled end date.

"You are keeping people in suspended animation. You are stopping them from actually working," he told London's Evening Standard.