Chancellor plans to reduce furlough pay from 80% to 60%

Rishi Sunak, Chancellor of the Exchequer has said that the furlough system is not sustainable and is preparing to cut the 80 per cent of wage subsidy offered to 60 per cent, in the first steps to bring the programme to an end.

Mr Sunak is set to announce plans next week which will wind down the scheme from July onwards.  This news has arrived as government sources have expressed worry regarding the cost of the scheme and employees becoming “addicted” to it.

Mr Sunak said:

I’m working, as we speak, to figure out the most effective way to wind down the scheme and to ease people back into work in a measured way.

Back in April, the Treasury announced that the Furlough Scheme was to be extended from the end of May to the end of June, allowing staff to be on furlough for another month.

It has been suggested the scheme will cost £10 billion-a-month, but Mr Sunak believes this was “the right decision” to make.

Not to mention in the same month the CIPD suggested that employers would like the Government to make the Coronavirus Job Retention Scheme (CJRS) more flexible, making it possible for furloughed workers to work reduced hours and for the scheme to be extended to the end of September.

A senior government source said

People are addicted to the scheme. We’re not talking about a cliff-edge but we have to get people back to work.

Matt Hancock, secretary of state for health and social care said:

We’ve got to wean off it.

HM Revenue & Customs (HMRC) revealed this week that 6.3 million jobs have been furloughed since the scheme went live. However, the Office for Budget Responsibility has predicted that if the number of people furloughed reaches 8.3 million the scheme will cost £42 billion over the course of three months.

Think tank, Resolution Foundation research also warned that the COVID-19 crisis could result in a rise of 640,000 18-24-year-olds being pushed in to unemployment this year.