Rishi Sunak today raised fears coronavirus curbs could drag on longer as he dramatically extended the furlough scheme for another month.
The Chancellor said the huge coronavirus bailout will now continue until the end of April to give businesses ‘certainty’, while firms will be able to access loans until the end of March.
He also confirmed that the budget will take place on March 3 setting out the ‘next phase’ of the recovery plan.
The move is an ominous sign that restrictions might need to be in place for longer than had been hoped, with Boris Johnson previously suggesting the life could be approaching normal by next spring.
Mr Sunak said: ‘Our package of support for businesses and workers continues to be one of the most generous and effective in the world – helping our economy to recover and protecting livelihoods across the country.
‘We know the premium businesses place on certainty, so it is right that we enable them to plan ahead regardless of the path the virus takes, which is why we’re providing certainty and clarity by extending this support, as well as implementing our Plan for Jobs.’
Under the furlough scheme the Government will continue to pay 80 per cent of the salary of employees for hours not worked until the end of April.
Employers will only be required to pay wages, National Insurance Contributions (NICS) and pensions for hours worked; and NICS and pensions for hours not worked.
Chancellor Rishi Sunak said the huge coronavirus furlough scheme will now continue until the end of April, while firms will be able to access loans until the end of March
Government borrowing could be close to £400billion this year and is set to continue at eye-watering levels into the mid-2020s, as this OBR chart shows
Before the announcement, Mr Sunak gave a fresh hint at looming tax rises warning that letting huge borrowing carry on would be ‘morally, economically and politically’ wrong.
The Chancellor said failing to tackle the structural deficit created by the coronavirus turmoil would leave the UK exposed to ‘future shocks’.
In an apparent shot across the bows at Boris Johnson‘s free-spending instincts, he also cautioned that it could be catastrophic for the Conservatives as there would not be ‘much difference between us and the Labour Party’.
Asked in an interview with the Spectator magazine about the huge scale of borrowing – which could be close to £400billion this year and is set to continue at eye-watering levels into the mid-2020s – Mr Sunak said it was not enough to rely on interest rates staying at historic low levels.
‘It is not sustainable to borrow at these levels. I don’t think morally, economically or politically it would be right,’ he said.
Mr Sunak added: ‘Running a structural deficit years into the future, with debt rising?
‘That’s not building up the resilience you need to deal with the future shock that will come along, and someone else will be sitting in my chair.
‘We now have had two of these things in a decade: who knows what the next shock will look like?’
Laying out the political threat from continuing to run up the tab, the Chancellor said the Tories could not give the impression that ‘rising debt is fine.
‘If we think borrowing is the answer to everything, that debt rising is fine, then there’s not much difference between us and the Labour Party,’ he said.
‘I worry about what that means for us politically down the line.’
Referencing former Cabinet minister Lord Hague – whose Richmond constituency he inherited – Mr Sunak also suggested action will be needed well before the next election.
‘William Hague always tells me you can’t fatten a pig on market day,’ he said.
In an apparent shot across the bows at Boris Johnson’s free-spending instincts, Mr Sunak cautioned that accepting ongoing borrowing would mean there is not ‘much difference between us and the Labour Party’
Mr Sunak was also asked about the idea of a one-off wealth levy to fill the coronavirus black hole in the finances.
Last week the Wealth Tax Commission floated a 1pc tax spread over five years on those with personal wealth of more than £500,000, saying it could raise £260billion.
However, Mr Sunak sounded sympathetic to critics who warned it would punish asset-rich, cash-poor families and force house sales.
While admitting he had yet to read the report, the Chancellor said: ‘I think that’s right, in the sense that we’re a party that believes in aspiration.
‘Actually, we should be celebrating aspiration.’