Rishi Sunak concedes recession is already happening in grim warning of hard times to come as he extends the furlough scheme again
- Sunak said it was clear June deadline for furlough would have to be extended
- Told MPs scheme would continue ‘completely unchanged’ until the end of July
- Furlough been accessed by 935,000 businesses since March costing £10billion
- Here’s how to help people impacted by Covid-19
Rishi Sunak extended the coronavirus job subsidy scheme until the end of October as he conceded yesterday that the UK is already in recession.
In a fresh sign that ministers believe Britain faces a long haul to economic recovery, the Chancellor said it was already clear that the furlough scheme would have to go well beyond its current deadline of the end of June.
Mr Sunak revealed that the scheme, which sees the taxpayer subsidise 80 per cent of wages up to a maximum of £2,500 a month, is already supporting an astonishing 7.5million jobs.
Chancellor of the Exchequer Rishi Sunak extended the furlough scheme deadline beyond June, as originally set out, as he conceded the UK is already in recession
He told MPs that the scheme would continue ‘completely unchanged’ until the end of July – despite warnings it could cost taxpayers more than £80billion.
After that, people who have been furloughed will continue to receive 80 per cent of their wages, but their employer will be asked to make a contribution towards the cost.
The scheme will also be tweaked to allow furloughed staff to start returning to work part-time from as little as one day a week – an idea that has been a key demand of business.
The extension was welcomed by both unions and business last night. The scheme has been accessed by 935,000 businesses since March and has already cost £10billion.
The move came as ministers braced themselves for official GDP figures which are expected to show the economy went into reverse in the first three months of this year, even before the impact of the lockdown was felt.
The job retention scheme is credited with shoring up millions of jobs that would otherwise have gone as the Government ordered the closure of huge swathes of the economy.
Sunak’s extension of the furlough scheme, which has already cost £10billion, was welcomed by both unions and business last night
Despite this, some 1.8million people have signed up for Universal Credit since the lockdown began.
Asked whether the country faced an inevitable recession, Mr Sunak told the BBC: ‘We already know that many people have lost their jobs and it breaks my heart.
‘We’ve seen what’s happening with Universal Credit claims already. This is not something that we’re going to wait to see, it’s already happening.
‘There are already businesses that are shutting. There already people who have lost their jobs. That’s why I’m working night and day to limit the amount of job losses.’
The Treasury declined to say how much the scheme was now likely to cost but Capital Economics predicted it could be £87billion, while the Institute for Fiscal Studies said it could cost almost £100billion by the end of October.
Last night Mr Sunak suggested the scheme, which will now run for at least eight months, was costing about £8billion a month.
From today, the self-employed will be able to apply for income support dating back to March.
But it is not yet known whether support for them will also be extended. Paul Johnson, director of the Institute for Fiscal Studies, said the generosity of the scheme might mean that some businesses remain closed ‘for longer than is absolutely necessary’.
But he added: ‘Maybe that is a lesser risk than people going back when it’s unsafe.’
Len McCluskey, general secretary of the Unite union, welcomed the extension, while the British Chambers of Commerce said it was a ‘huge help and a huge relief for businesses across the UK’.