Chancellor extends furlough until March

By Gareth Jones

The Chancellor Rishi Sunak today announced that the furlough scheme will be extended until next March, with those unable to work receiving 80 per cent of their wages from the government until next Spring. 

This significant and abrupt policy change came from the government while many eyes were still focused on the US Election. When the Chancellor took to the House of Commons this lunchtime, more UK political watchers were more interested in events unfolding in Pennsylvania, Georgia, Arizona and Nevada – and some may even have missed what was a major and expensive U-turn from HM Treasury.

When the Prime Minister announced the return to nationwide lockdown last Saturday, the furlough scheme was originally extended until early December, but speaking today the Chancellor said he intended “to give businesses security through the winter” and added that “the security we are providing will protect millions of jobs”. This extension was a recognition that businesses are likely to face significant hardship through the winter months, either directly due to government-mandated closures or more generally through the ongoing harsh trading conditions. The package includes increased levels of support for the self-employed and an additional £2bn for Scotland’s, Wales’ and Northern Ireland’s governments if they pursue their own lockdowns.

Critics have highlighted the increasingly chaotic nature of government announcements on economic support. This latest package represents at least the fourth major policy change on business and job support from the Chancellor in the past six weeks. When delivering his announcement, Sunak stressed that “It is not a weakness to be fast-moving in a crisis, but rather a strength”. The Labour Party, however, were quick to highlight that the Chancellor has been too slow to get to a policy position which they viewed as inevitable and that the government’s delay has cost jobs and livelihoods. 

Like the Prime Minister last week, the Chancellor has found himself having to U-turn to a policy position he had previously derided the Labour Party for holding. Only a few weeks ago, Sunak criticised those calling for “endless extensions of furlough”, describing it as “irresponsible”. No doubt, today’s announcement was uncomfortable for the Chancellor – and one that will further impact public finances, but others will be pleased that he has bitten the bullet and provided a level of reassurance to businesses and workers ahead of a very difficult winter.

The length of the furlough extension also raises some interesting questions. Firstly, it raises doubts about whether current lockdown restrictions will end in early December, or whether they will be extended for longer. Secondly, it has also raised speculation about whether the furlough scheme would also be used as a way to cushion the immediate impact and disruption businesses would face (regardless of deal or no deal) at end of the Brexit transition period in January.