Sunak has extended the scheme until October, but the devil will be in this week’s detail.
The Chancellor has signalled that from August firms will have to contribute to the wages of furloughed workers. However, the scheme will be more flexible, allowing workers to come back on a part-time basis with some of their pay covered by the state.
Sunak is expected to announce the first cut in the subsidy when he fleshes out details of his revamped scheme this week. The Treasury is likely to initially taper the wage support down from 80pc of furloughed workers’ wages to somewhere in the region of 60pc. Businesses would therefore have to top up pay if they wanted to keep employees on furlough. The level of state support be lowered further as the economy’s reopening progresses.
“It has to end at some point and the best way to end it is in a tapered way,” says Craig Beaumont at the Federation of Small Businesses. He says the “debate is over the timing and how that relates to the opening up of the economy”.
Firms forced to stay closed when the scheme starts to taper, such as pubs and restaurants, should be allowed to claim the full amount currently available, Beaumont says. “If your workplace has to be closed, the Government should maintain the full furlough. That is logical and feels right.”
Even a small step lower in the wage subsidy forces bosses to make a decision on whether the furloughed employee is ever likely to return to work. Business wage bills would rise by about £3.5bn every month if the subsidy was tapered to 60pc and the same level of support was needed.
One in two firms using the subsidy said they could provide 20pc or more of furloughed workers’ wages, according to the Institute of Directors (IoD). However, its survey found a quarter could not afford to make any contribution at all, putting jobs in danger when the tapering kicks in.