Sunak U-turn extends furlough until end of March

The Chancellor has bowed to pressure by extending his Covid-19 furlough programme for five months with England in a second lockdown to stem the virus's spread.

Rishi Sunak told the House of Commons the government would continue to pay up to 80% of people's wages for hours not worke until the end of March. The programme of support ended on 31 October but was hastily reinstated for a month as the government announced new restrictions.

The move is a major U-turn from Sunak who won praise for his measures to preserve for jobs early in the crisis but who has faced mounting criticism for diluting support while businesses were still struggling. His hand was forced by the Prime Minister Boris Johnson's reluctant decision to close much of the economy again until 2 December at the earliest.

Sunak also said the government would increase support for struggling self-employed workers to 80% of profit from 40% and make furlough funds available to devolved administrations. He made his fiscal moves after the Bank of England announced a bigger than expected increase in bond purchases to prop up the economy.

Sunak said: "The furlough scheme will not be extended for one month, it will be extended until the end of March.

The government will continue to help pay people’s wages up to 80% of the normal amount. All employers will have to pay for hours not worked is the cost of employer NICs [national insurance contributions] and pension contributions.

"We will review the policy in January to decide whether economic circumstances are improving enough to ask employers to contribute more."

The chancellor had spent months stressing he could not save every job and that the government had already spent £200bn to help businesses and workers. He told the Tory conference in September there was no point being a Conservative if he did not "balance the books".

He told MPs his September economic plan, now ditched, was drawn up for an economy that was open for business but that the resurgence in coronavirus cases had changed the outlook. The Labour opposition had been calling for furlough to be extended and for a short "circuit break" shutdown for weeks.

Labour's shadow chancellor, Anneliese Dodds, accused Sunak of acting too late when it was clear that more support would be needed. Unions and business lobby groups have called on Sunak to provide more support for businesses and workers.

"It is not a weakness to be agile and fast-moving in the face of a crisis, but rather a strength," Sunak said.

Sunak said in September the furlough programme would be replaced by a job support scheme with lower Treasury contributions and higher employer costs. Its critics said the plan gave struggling businesses little incentive to keep workers on and Sunak made adjustments in October.

Jonathan Geldart, director general of the Institute of Directors business group, said: “Extending furlough is the right call from the Chancellor. This will give directors much greater confidence about their ability to keep staff on board through the winter.

“While the Treasury had improved the jobs support scheme, furlough is a known quantity. To support as many jobs as possible through the crisis, consistency and clarity is vital."