Coronavirus: Rishi Sunak expected to extend furlough scheme but could cut support to 60 per cent

Chancellor ready to cut salary payments from 80 per cent to 60 per cent, reports suggest

Chancellor Rishi Sunak is set to announce the extension to the furlough scheme that subsidises the wages of workers temporarily laid off due to the coronavirus.

At least 6.3 million people are currently having up to 80 per cent of their salaries paid under the government’s job retention scheme, costing at least £8bn since it was introduced in mid-April.

Mr Sunak is expected to tell the House of Commons on Tuesday that the programme will continue to September – although the rate of support could be cut to 60 per cent, according to reports.

However, the former governor of the Bank of England Mervyn King warned the chancellor against reducing the scheme to 60 per cent of earnings until the economy has recovered further.

Lord King told BBC Radio 4’s Today programme: “Indeed, keep it at 80 per cent. I don’t think it makes sense to regard this as the major cost of the Covid-19 crisis in economic terms.”

The chancellor has previously said he was preparing to “wean” workers and businesses off the programme, which currently runs until the end of June.

Although he warned last week that the furlough scheme was not “sustainable” at its current rate, Mr Sunak promised there would be no “cliff edge” cut-off.

There has been speculation that the chancellor is preparing to lower the £2,500 cap on monthly payments as well as cutting the rate of subsidy.​

Torsten Bell, chief executive of the Resolution Foundation think tank and an early advocate of the furlough scheme, said it should only be phased out gradually.

“Moving too quickly could spark a huge second surge in job losses at a time when unemployment already looks set to be at the highest level for a quarter of a century,” he said.

“This policy has made a huge difference in this crisis. It now needs careful and gradual change to ensure the benefits it has provided are secured rather than squandered.”

Chancellor Rishi Sunak in Downing Street (EPA)

Meanwhile, the managing director of the UK’s largest leisure operator GLL Mark Sesnan has suggested any tapering should be looked at on a sector-by-sector basis since pubs, cafes restaurants and hotels have been particularly hard hit by the lockdown.

“Industries such as leisure and hospitality [should be] protected. This is because, in order to adhere to social distancing guidelines, we will have to operate at a significantly reduced capacity,” said Mr Sesnan. “In turn, this will have a major impact on the number of staff able to return to work fully.”

On Monday Boris Johnson told the Downing Street briefing that the furlough scheme “has been one of the most remarkable features of the government’s response” and claimed it was “unlike anything seen internationally”.

His ministers are also to set out guidance today on how commuters can travel safely on public transport as the coronavirus lockdown begins to ease.

Some transport unions have called for rail services to be shut down if the two metre rule cannot be met.

The TUC, meanwhile, has welcomed the publication of government guidance on how workplaces can be made “Covid-secure” as they re-open. Employers, including factories and construction sites, will be required to carry out a risk assessment before they can resume.

This followed criticism by unions that the prime minister had issued his return-to-work call in his broadcast on Sunday without explaining how it could be safely achieved.