Government begins to wind down furlough scheme

From today, employers now have to contribute to the cost of keeping their staff furloughed – but there are calls for the Government to extend the scheme.

Until 1 July, the government paid 80% of the wages of people who were unable to work or whose employers could not afford to pay them, up to a monthly limit of £2,500.

From today, the government will pay only 70% of salaries, and employers will contribute 10%. Then in August and September, the government will pay 60% and employers will pay 20%. The monthly limit of £2,500 is staying in place.

Employers have already had to take back responsibility for paying pension and National Insurance contributions but the Government hopes that scaling down the Coronavirus Job Retention Scheme will mean more staff will return to work before it ends on 30 September.

According to the Institute for Fiscal Studies, the average cost for employers keeping a member of staff on furlough is rising to £322 in July and £489 in August and September.

Both Labour and unions have called for Treasury Secretary Rishi Sunak to consider extending the furlough scheme as many businesses continue to be unable to operate fully due to Covid-19 restrictions.

TUC general secretary Frances O’Grady said: “Furlough has played a vital role in protecting jobs and keeping businesses running during this pandemic. Ministers must not pull the plug on our recovery by cutting off support too soon. The Government should hold off hiking up employer contributions until all restrictions have been lifted.

“And we need a cast-iron commitment from the chancellor that he will extend furlough for as long as is needed, rather than ending it abruptly in three months’ time. Working families need this certainty now – not a rollercoaster approach to protecting livelihoods.”

However, on the BBC Radio 4 Today programme this morning, Cabinet minister Kwasi Kwarteng ruled out any extension. “Furlough was an exceptional policy in extreme times, in unprecedented times, and it was always the case that the furlough was going to come to an end at some point. I think the Chancellor’s right: he’s made an assessment that as the economy opens up, the furlough should be tapered.”