Rishi Sunak is reportedly considering replacing the furlough scheme with German-style wage subsidies to help businesses in the UK.
The chancellor was set to announce an extension of Government-backed loan schemes for those struggling – but according to sources he decided to delay it at the last minute.
It is thought one of the parts of the support package he is considering is a longer-term replacement for the furlough scheme.
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Foreign secretary Dominic Raab told Sky News this morning: ‘We’ve saved 12 million jobs, we’ve got the job retention bonus and kickstart scheme, but I don’t think the chancellor is minded to wholesale extend the furlough scheme.
‘We are looking at targeted measures and keeping them constantly under review, and we’ve done a great job at keeping those jobs and those businesses alive through the peak of the crisis and of course, we want to keep afloat as many of them as possible.
‘And I know that’s at the forefront of the chancellor’s considerations with the future budgets and spending review in mind.’
Mr Raab also confirmed the furlough scheme ‘will come to an end’ and will not be extended.
But as a replacement one of the options Mr Sunak is reportedly considering is a similar scheme to Germany’s ‘Kurzarbeit’, or short-term work system.
The Coronavirus Job Retention Scheme allows employers to put their staff on temporary leave while keeping their job, and the Government subsidises 80% of their wages.
But Kurzarbeit is based on part-time work, allowing employers to reduce employees’ hours while keeping them in a job. The Government then pays workers a percentage of the money they would have got for working those lost hours.
Matthew Oxenford, an analyst at the Economist Intelligence Unit, said: ‘There is a real risk that many jobs in the UK economy, particularly in the hospitality sector, are not viable in their current form, and so the design of the furlough scheme may lock these people into jobs that don’t exist, delaying the recovery.
‘However, given that demand and job growth are likely to remain suppressed for some time, especially as restrictions tighten, the Treasury is likely to need to provide additional financial support to households.
‘This could take the form of massively expanded unemployment insurance, a part-time wage subsidy scheme, or other creative solution.’
The Trade Unions Congress, which helped Mr Sunak draw up the original furlough scheme, suggested similar proposals to Kurzarbeit earlier this month.
A source told the Guardian the Treasury is ‘attracted’ to the Kurzarbeit idea, and is also considering launching a scheme where workers undertake education or training while they are away from work and being subsidised by the Government.
Discussions around a replacement for the furlough scheme have reportedly been continuing in recent days – while the PM suggested an announcement is imminent.
Mr Johnson told MPs in the Commons yesterday: ‘I know that my right honourable friend the chancellor will be applying, as I say, his imagination and his creativity to helping those sectors in the months ahead.
‘But the best thing for them is to get back to life as close to normal as possible by getting this virus down and that is the point of the package of measures that we are announcing today.’
The Treasury declined to comment on any further measures.
Employers looking to make fewer than 100 redundancies must run a 30-day consultation, meaning October 1 is the last point they could start this process before the furlough scheme closes at the end of the month.
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