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UK furlough extension: Rishi Sunak prolongs job protection scheme throughout winter

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Britain's Chancellor of the Exchequer Rishi Sunak gives an update of the economy in the House of Commons in London on November 5, 2020.
Britain's Chancellor of the Exchequer Rishi Sunak gives an update of the economy in the House of Commons in London on November 5, 2020.   -   Copyright  AFP PHOTO / PRU
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The British government has extended its salary support scheme until the end of March 2021 to stave off a mass layoff of workers amid the coronavirus pandemic.

Under the furlough programme, the state pays 80% of the wages of people kept on by firms rather than made redundant, up to a ceiling of £2,500 (€2,764) a month.

The decision means the scheme will continue for nearly another five months, not one month as was first announced. Last week the government said it would be prolonged until early December to coincide with the expiry of a new lockdown in England, which came into force this Thursday.

The move is accompanied by a new stimulus programme from the Bank of England, which said earlier that it was to pump an extra £150 billion (€165.9 billion) into the economy, a higher amount than expected.

'Do whatever it takes', says Sunak

Details of the extended government support for workers were announced in parliament by Britain's finance minister, who linked it to COVID-19's unexpected persistence.

"I’ve always said I would do whatever it takes to protect jobs and livelihoods across the UK and that has meant adapting our support as the path of the virus has changed," Chancellor of the Exchequer Rishi Sunak told the House of Commons.

"It’s clear the economic effects are much longer lasting for businesses than the duration of any restrictions, which is why we have decided to go further with our support."

The Resolution Foundation, a think-tank campaigning for people on low to middle incomes, estimates that the extension is likely to cost £6.2 billion (€6.9 billion) a month, describing the figure as "huge, but necessary".

'Poor value for money'

However it has criticised the government's plans for self-employed workers, who Rishi Sunak said would benefit from similar subsidies.

"This scheme has paid far too much money to some self-employed workers who have suffered no income loss during the crisis, while missing close to 500,000 workers who have lost all their income. Today’s extension will only exacerbate these problems, and offers poor value for money," the foundation said in a statement.

The government's announcement represents another change in policy the Resolution Foundation describes as a "five-stage U-turn". In late September Sunak unveiled a new jobs support programme to replace the furlough scheme.

Brexit impact

The extension means that the furlough scheme protecting UK workers will be in place when the post-Brexit transition period expires at the end of 2020.

This is important as major additional economic upheaval is predicted should no trade deal be struck with the EU. Serious differences remain over key issues despite renewed, intensive talks over the past fortnight.

In terms of employment, the furlough extension could postpone to a certain extent a no-deal "cliff-edge" until early April. It also might make the cause of subsequent job losses -- Brexit or COVID-19 -- harder to determine.

Rishi Sunak told parliament that overall the government had paid out £200 billion (€221 billion) in subsidies to support the economy during the pandemic.

He addd that the current policy would be reviewed in January to see whether the economic circumstances justified asking employers to pay more towards the furlough scheme.