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12 May 2020updated 23 Jul 2021 9:28am

Rishi Sunak avoids a time-bomb over furlough scheme

The Chancellor has distanced himself from anonymous briefings describing furloughed workers as "addicted", and will keep the level of support at 80 per cent of wages.

By Ailbhe Rea

Rishi Sunak has announced the path ahead for the job retention scheme over the coming months, a scheme which is currently paying 80 per cent of wages to 6.5 million people who have been laid off due to the economic impact of coronavirus. 

The main news is, in some ways, the lack of news. The scheme will continue until the end of July with no changes, and from August until October with greater flexibility, allowing people to return to work part time, with employers sharing the cost. Crucially, the overall level of support remains the same, despite widespread expectations that Sunak would announce a decrease in support to 60 per cent of wages. 

That drop to 60 per cent could have been a ticking time-bomb down the line for the Chancellor, with a huge risk that it would tip millions of people into a situation where they could no longer make ends meet, with no guarantee of finding other work amidst the downturn.

Instead, the Chancellor was able to announce that there will be no change to the overall level of support, avoiding both a day of bad headlines and the potential for very serious economic damage in the longer term.

He took the opportunity, when prompted by the shadow chancellor Anneliese Dodds, to instead re-emphasise his commitment to supporting furloughed workers, and to publicly distance himself from recent anonymous briefings suggesting that people have become “addicted” to the furlough scheme and need to be “weaned off” it.

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“The use of the word addiction is not one that I have ever used and not one I agree with,” the Chancellor said. “Nobody who is on the furlough scheme wants to be on this scheme.”

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More details of the scheme will follow, with the potential for some disagreement over the small print. But for the moment, the Chancellor has avoided a controversial move, and averted a potential ticking-time bomb under the economy.