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06th May 2020

Rishi Sunak planning to wind down furlough scheme by July

Josh Kaplan

Since the government furlough scheme was announced, over 6.3m employees have been enrolled, relying on the government to pay up to 80% of their salary under £30,000. A quarter of the British workforce is now estimated to be enrolled in the program and receiving their wages direct from the government.

Faced with the every-growing cost of furlough, Rishi Sunak is set to announce a tapered end to the furlough scheme, starting in the summer. In an interview earlier this week, The Chancellor told ITV: “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.”

The Treasury is thought to be considering a variety of options to reduce the cost of the furlough scheme and to offer support to businesses that remain unable to open even with some restrictions lifted.

Among the options being weighed up are cutting the 80% subsidy  to 60% or lowering the £2,500  payment cap. According to the Guardian, another option is to allow furloughed staff to work, but with a smaller subsidy.

Sunak is expected to announce details of any new plan soon as employers making more than 100 staff redundant must run a 45-day consultation before laying off staff.

The Office for Budget Responsibility has estimated that furlough could cost £42bn over the next few months if 8.3 million people are furloughed at an 80% salary rate. It could cost a further £12bn for each additional month at this level, according to the Resolution Foundation.