Only the most financially desperate workers would be kept on the Government’s wage support scheme under draft plans to wind it down after June, HOAR can reveal.
Rishi Sunak is looking at targeting the furlough scheme at certain age groups and the worst-hit sectors as part of plans to gradually wean workers off the state-subsidised wage support.
The Chancellor is also considering cutting the 80 per cent wage subsidy to 60 per cent, which would cut income by up to £625 a month. The scheme could then be reduced even further over coming months – encouraging people to look for new jobs.
The changes being considered are focused on “incentivising work,” a source said.
Mr Sunak is expected to announce how the job retention scheme will change after June next week.
He wants to give firms certainty about the scheme beyond June and making an announcement by the end of next week is key because employers who are planning to make staff redundant in July must give 45 days notice. The deadline for this is May 18.
HOAR understands that options being considered include only making the job retention scheme available to workers who the Treasury deem as most financially unstable.
This could include renters who are living “hand-to-mouth” each month and whose large proportion of income goes on rent and bills. They are also less protected than homeowners, who are eligible for mortgage holidays. Although tenants can only apply for rental deferrals, landlords are not obliged to comply, while the move would also help prevent them being evicted due to unpaid rent.
This could be administered by targeting certain age groups, such as millennials – workers in their 20s and 30s who are much more likely to rent.
This idea would help young workers stay attached to their current jobs and help protect their future job prospects.
Treasury insiders said changes to the scheme could see only workers in sectors that are deemed vital to protect kept on the furlough scheme.
This could also allow the Treasury to keep workers furloughed in industries that are likely to be closed longer-term, such as pubs, restaurants, hotels and the tourism industry in general.
But industry experts warned that this would cause problems for small businesses that don’t fit into one sector.
Federation of Small Businesses chief Mike Cherry warned: “Government must avoid applying a sector straightjacket that doesn’t work for small firms – there are far too many businesses who don’t fit neatly into one box who will need time to get back up and running – like small companies that mainly supply to hotels but aren’t hospitality businesses.”
The Treasury is also looking at allowing furloughed employees to work part-time. The Government’s subsidy would be smaller under this option, but it would avoid employers being forced to bar staff from working in order to be eligible for the wage support.
The Treasury has said that designing a part-time furlough scheme would be much harder to administer.
But officials have told industry groups that it is possible and they are waiting for “political direction”.
The FSB’s Mr Cherry urged the Chancellor to prioritise working on finding a part-time furlough scheme that would offer businesses maximum flexibility as they attempt to reopen in the coming weeks.
He said: “Small firms must be allowed to get back on their feet one step at a time – 16 million jobs depend on it.
“It’s a difficult situation, but the only feasible option is to allow part time furloughing where furloughed staff can return to work for part of their contracted hours. This will enable small employers to stagger back the return of their staff at a time when we know economic activity will be at record low levels.”
He added: “We need to see these changes made from the beginning of June as small businesses restart. Orders are going unfulfilled because a few hours work doesn’t justify bringing somebody off furlough. Businesses can’t even quote for jobs once lockdown lifts. Time is of the essence.”
News of the plans to tweak the job retention scheme come after Mr Sunak confirmed earlier this week that he was working on the best way to gradually close it down, which is currently due to run until the end of June.
He told ITV News: “To anyone anxious about this, I want to reassure that there will be no cliff-edge to the furlough scheme.
“I’m working as we speak to figure out the most effective way to wind down the scheme and ease people back into work in a measured way.”