Chancellor Rishi Sunak preparing to wind down furlough scheme but promises 'no cliff edge'
The Chancellor's Job Retention Scheme has proved extremely popular since it went live two weeks ago.
Already 6.3 million employees in the UK have been "furloughed", meaning the government is paying 80% of their wages.
The idea is that the scheme incentivises companies to hold onto their staff even as the economy heads into a severe recession.
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The chancellor has already extended the Job Retention Scheme (JRS) scheme once and is under pressure to do so again. Various business groups have warned of mass redundancies unless taxpayer support continues beyond the end of June.
But Rishi Sunak said on Monday he is preparing to phase out the scheme as the economy begins to unlock.
"To anyone anxious about this I want to reassure them that there will be no cliff-edge to the furlough scheme," he told ITV News.
The chancellor 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."
"As some scenarios have suggested, we are potentially spending as much on the furlough scheme as we do on the NHS, for example. Clearly that is not a sustainable situation," he added.
Take-up for JRS has been incredibly strong, possibly stronger than the Treasury envisaged.
ITV News Business and Economics Editor Joel Hills explains how serious the coronavirus economic downturn this is and how there is still a lot of taxpayer support at the moment despite the phasing out of the JRS
Last month, the Office for Budget Responsibly calculates that if 8.3 million people ended up being furloughed - and we're not far off that number now - it would cost the government around £42 billion over three months.
That is an extraordinary sum of money and, as the chancellor points out, is getting on for the size of the health budget. For as long as the JRS exists there's also little incentive for firms to reopen and make social distancing work.
The chancellor is signalling to companies they will have to start preparing to wean themselves off.
He hasn't said how the support will be withdrawn but, presumably, it will be done sector by sector. The level of cover - currently 80% of pay, up to £2500 a month - could also be made less generous.
The obvious danger here is that an unknowable percentage of the people who are currently furloughed will find they don't have a job to return to.
We are heading into what is widely expected to be the worst downturn in more than a century but the level of support the government is offering to businesses to cushion the blow is unprecedented.
The government launched "Bounce Back Loans" on Monday. Small businesses will be able to borrow up to £50,000 with a 100% government guarantee.
The chancellor says the application process is straightforward and there was strong demand when the loan scheme went live at 09:00 this morning.
"There were tens of thousands of applications already by lunchtime” Rish Sunak said.
"I’m confident that there’s a simple form to fill in and that many of those businesses will have money in theory accounts by as early as tomorrow, providing them with vital bridge they need through this difficult time."
Six weeks ago the chancellor promised that more than £300 billion of taxpayer backed loans would be available for companies.
But there have been widespread complaints that small businesses in particular have struggled to access the help on offer.
Sixty per cent of pubs, hotels, restaurants report having had their loan applications rejected by banks.
The launch of Bounce Back Loans is a recognition that money hasn’t reached the companies who need it quickly enough but the chancellor insists the existing Coronavirus Business Interruption Loan Scheme (CBILS) is now working as designed.
"Actually 30,000 loans have now gone out, worth almost £5 billion pounds," he said before adding: "That’s a lot of businesses. 30,000 businesses have got that magic life-line, it will help them bridge through this difficult period."
"Both schemes are now working and making a real difference to businesses across the country," he said.
In the current climate, some businesses say they are reluctant to take on extra debt. The chancellor insists Bounce Back loans will need to be repaid. He won’t consider writing them off, even if the downturn persists.
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