Chancellor Rishi Sunak has unveiled a new emergency jobs strategy that will replace the current furlough scheme, called Coronavirus Job Retention Scheme.
According to Chancellor Sunak, the new emergency jobs scheme, dubbed the Jobs Support Scheme, will enable workers to receive three quarters of their normal salaries for six months.
It is aimed at preventing mass job cuts following the UK government's introduction of new measures to address the increase in coronavirus cases. Sunak said it was part of a wider "winter economy plan".
Calls to extend the furlough scheme
Earlier this month, leading business groups warned that if the furlough scheme is not extended, the country may face a second wave of job cuts. They claim that the UK risks additional job cuts and a slower economic recovery if it fails to extend the current furlough scheme.
The Coronavirus Job Retention Scheme allows employees placed on leave to receive up to 80% of their pay, up to a maximum of £2,500 a month. Initially paid by the government, firms are now contributing part of the wages for those under the scheme.
Almost 10 million workers have benefited from the program but it will end on October 31.
Manufacturing body Make UK argued that the furlough scheme should be extended beyond October for sectors that have been hit hard by the effects of the coronavirus pandemic and are already experiencing workforce reductions.
Make UK chief executive Stephen Phipson said: "The protection of key skills should be a strategic national priority as this will be the first building block in getting the economy up and running."
Meanwhile, the Confederation of British Industry (CBI) said a replacement was needed to avoid a "cliff edge". Head of the CBI Dame Carolyn Fairbairn explained that while the furlough scheme had been expensive, it was “an absolute lifesaver” and more help was needed.
She also mentioned that around 25% of businesses in the hospitality, retail, leisure and travel sectors are facing the possibility of insolvency.
Bank of England governor's take
Bank of England Governor Andrew Bailey has called on the UK government to "stop and rethink" its current furlough scheme.
In August, Bailey supported ending the current scheme, arguing that workers should be helped to transfer to another work rather than stay in unproductive jobs.
However, while speaking on a webinar hosted by the British Chambers of Commerce on Tuesday, Bailey pointed out that some sectors may benefit from continued targeted assistance.
The new scheme
Sunak said: "The government will directly support the wages of people in work, giving businesses who face depressed demand the option of keeping employees in a job on shorter hours, rather than making them redundant."
He added that the new scheme would "support only viable jobs" and not those that only exist because the government is continuing its wage subsidy.
Compared with the previous scheme, the new one will enable the government to lower its contribution to workers' pay from 80% of a monthly wage of up to £2,500 initially to just 22%.
"The primary goal of our economic policy remains unchanged - to support people's jobs - but the way we achieve that must evolve. I cannot save every business, I cannot save every job," the Chancellor explained.
