Video report by ITV News Correspondent Carl Dinnen
Rishi Sunak will announce plans to extend the furlough scheme until the end of September at Wednesday's Budget, with employers asked to contribute to workers’ salaries from July.
Addressing MPs in the Commons, the chancellor will pledge to continue to help businesses and individuals through the “challenging months ahead – and beyond”.
He is expected to say the Coronavirus Job Retention Scheme - which has protected more than 11 million jobs since it began - will keep going until the autumn.
However the government’s contribution to the scheme - which is estimated to have cost around £60 billion - will be tapered off from July.
Employers will be asked to pay in alongside the taxpayer to help fund the cost of furloughed employees.
ITV Political Editor Robert Peston discusses why furlough is being extended
In July, employers will be expected to contribute 10%, increasing to 20% in August and September, as the economy reopens. Employees will continue to receive 80% of their salary for hours not worked until the scheme ends.
The chancellor will also announce further support for self-employed workers, with more than 600,000 people – many of whom become self-employed in 2019/20 – now eligible for cash grants.
A fourth grant from the Self-Employment Income Support Scheme (SEISS) will be available to claim from April, worth 80% of three months’ average trading profits up to £7,500.
The Treasury said that hundreds of thousands more people will be eligible for the grants this time, as tax return data for 2019/20 is now available.
Mr Sunak faced criticism that newly self-employed people were unable to benefit from the scheme previously.
The chancellor is expected to outline further details of the proposals on Wednesday, alongside plans for a fifth grant.
Ahead of the Budget, he said: “Our Covid support schemes have been a lifeline to millions, protecting jobs and incomes across the UK.
“There’s now light at the end of the tunnel with a roadmap for reopening, so it’s only right that we continue to help business and individuals through the challenging months ahead – and beyond.”
The chancellor will pledge to use “fiscal firepower” to protect jobs and livelihoods, vowing to do “whatever it takes” to help businesses and people through this “moment of crisis”.
He is expected to set out a three-point economic plan focused on supporting people through the Covid-19 pandemic, fixing the public finances and building the future economy.
Mr Sunak will tell MPs: “First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis.
“Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that.
“And, third, in today’s Budget we begin the work of building our future economy.”
The Treasury said the Budget will build on the government’s plan for jobs and the £280 billion package of support during the coronavirus crisis.
Labour criticised the timing of the furlough extension, accusing the government of trying to ensure "the focus is on Rishi Sunak getting his moment in the sun rather than protecting jobs and livelihoods".
Bridget Phillipson, Labour’s Shadow Chief Secretary to the Treasury, said: "These changes to support schemes could have been made months ago. Businesses and workers have been pleading with the chancellor to give them certainty - but they have had to wait because he said it wouldn’t be appropriate until the Budget.
"Announcing it the night before shows the focus is on Rishi Sunak getting his moment in the sun rather than protecting jobs and livelihoods.
“We need a Budget that secures Britain’s recovery and rebuilds the economic foundations the Conservatives weakened before the crisis.
"That means a plan to support jobs and businesses, protect family finances and set Britain on the path to a better, more secure future.”
But the CBI’s chief economist Rain Newton-Smith said extending the scheme will keep “millions more in work and give businesses the chance to catch their breath as we carefully exit lockdown”.
“The furlough scheme has been a stand-out success throughout the crisis. It’s common-sense to keep the scheme going while business resilience remains fragile for some months yet,” she said.
“As we make progress into the summer, it’s right that businesses start contributing a little more as revenues start to recover. Meanwhile it’s great to see more support for the newly self-employed, who have missed out over the last year.”
Torsten Bell, chief executive of the Resolution Foundation, said: “It’s welcome that the furlough scheme that has seen British workers through this crisis will remain in place until restrictions are lifted, playing a critical bridging role between the lockdown and the recovery.
“The phased tapering off over the summer will also avoid a risky cliff-edge.
“But the peak of unemployment is ahead rather than behind us. We also need to see wider economic stimulus to drive the recovery this autumn, and support for the millions of people who have been without work for long periods during this crisis.”