Kate Andrews Kate Andrews

How will Rishi Sunak roll back the furlough scheme?

Picture by Pippa Fowles / No. 10 Downing Street

Just weeks ago, Chancellor Rishi Sunak claimed that widespread use of the furloughing scheme was proof of its success. But it appears the government has over-achieved. The Treasury’s original prediction was that 10 per cent of businesses would use the salary safety net; the figure has turned out to be closer to 70 per cent. The cost for just one month of the scheme is estimated to be £8 billion, only £3 billion less than the NHS’s monthly budget. ‘We’re not talking about a cliff-edge but we have to get people back to work.’ says Matt Hancock, the health secretary. ‘We’ve got to wean off it.’

After telling ITV early this week that the scheme was ‘unsustainable’ for the long-haul, Sunak is changing tack. The Times has now revealed that he will be publishing his plans to roll back the scheme next week, as its price tag has become too big: options include cutting the wage subsidy or lowering the £2,500 cap.

Over half of adults in the UK are now being financially supported by the government in some way

Over half of adults in the UK are now being financially supported by the government in some way, as 6.3 million people have been furloughed, and a surge in new Universal Credit claims has made millions more people reliant on taxpayer funds.

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The UK has gone from record low unemployment to estimates that 10 per cent of the labour force is now out of work. The Treasury won’t just be managing the unexpected demand for unemployment benefits, but the loss of tax revenue as well, with over two million more people out of work. Even the best-case scenario for economic rebound comes with a caveat for employment: scenarios so far suggest that even if the economy comes roaring back, in a V-shaped style recovery, jobs lost to Covid will take longer to return than GDP.

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But how the Chancellor rolls back the scheme is likely to prove more challenging than implementing it.

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