The UK Treasury will end its job protection programme at the end of October, raising fears of a surge in unemployment as the government furlough scheme winds down beginning in August.
“The furlough scheme cannot and should not go on forever…leaving it open forever gives people false hopes” of returning to work, said Chancellor of the Exchequer Rishi Sunak, presenting a summer economic statement to parliament.
The government has “supported more than 11 million people in work” since launching the package in March, said Sunak – or just over 20% or the work force. The Job Protection Scheme covered 80% of furloughed workers’ wages up to a ceiling of £2,500 per month. Employers will be required to contribute 20% of wages from August, before the scheme ends in October.
The furlough scheme has protected UK workers from mass unemployment, with joblessness hovering at just under 4% in the three months to April. More up-to-date data are not due for release until next week.
However, the government will pay employers £1,000 for each worker brought back from furlough and retained through the end of January, at a cost of some £9 billion. Sunak also announced a raft of measures to support young workers, who have been disproportionately hit by job cuts, particularly in the hospitality and retail sectors. The government will pay a bonus to companies that take on apprentices and pick up the wages of workers under the age of 24 for the next six months.
“I will never accept unemployment as an unavoidable outcome,” said Sunak, adding that the government’s plan for jobs “will not be the last action”.
The chancellor also unveiled measures to support the stricken leisure sector. Value-added tax on food, accommodation and attractions will fall to 5% from the current level of 20%, a cut that will stretch into early next year. In addition, Sunak launched a scheme dubbed, “Eat Out to Help Out”, which provides a 50% discount on restaurant meals up to a maximum of £10 per person. The plan is “the first of its kind…a government-backed discount for all”, said Sunak.
As widely expected, the Chancellor also adjusted stamp duty on land purchases, exempting properties valued at £500,000 or less from government levies, up from the current level of £125,000.
Sunak’s statement comes a day after the Bank of England chief economist Andy Haldane stressed that the economy is recovering more quickly than the Bank anticipated. Haldane has become a noted optimist at the central bank, dissenting from the majority view to broaden the BoE’s quantitative easing programme at the last rate-setting meeting in June.