Rishi Sunak's ideas on how to replace the furlough scheme

UK Chancellor Rishi Sunak has begun weighing up plans to continue to subsidise workers' wages as pressure to battle a potential unemployment spike rises once the government's furlough scheme ends in October.

The current prevailing idea is a German-style wage subsidy system to help businesses get through the second wave of the coronavirus pandemic.

This comes shortly after news that nearly 700,000 jobs were lost owing to coronavirus lockdown, and the chancellor has vowed to tackle a potential unemployment crisis looming overhead due to the unpredictable economic situations presented by Covid-19.

Mr Sunak has also looked at whether or not businesses should help cover the costs of the scheme for workers who can only be employed part-time, owing to the existing sanctions.

The chancellor is expected to work these new subsidies into the fresh restrictions Prime Minister Boris Johnson has announced to help stem a potential second wave.

Announcing his plans, the prime minister told MPs on Tuesday: "We will continue to put our arms around the whole workforce of the UK and to protect jobs and livelihoods, but we also want to see those businesses continuing and new jobs being created."

Sunak was expected to announce four different government-backed loan schemes that would last until November. This announcement was delayed, and business leaders have suggested these loans are to be integrated into a range of other measures to create a broader package of support.

He was also the minster to think up the "eat out to help out" scheme, which reduced inflation to record lows following the initial wave of Covid-19, however, some people blame this scheme and the preemptive reopening of the hospitality sector for the emerging second wave of the virus.

More than £57 billion (€61.8 billion) has been borrowed from businesses since March, and the treasury has guaranteed 80% of the value of the loans.

According to colleagues of the chancellor, no official decision had been made yet, but they were also considering looking at schemes in France, Germany and Spain that help companies who are not yet able to bring back workers on a full-time basis because of the economic situation.

According to government sources, the current leading plan is one based on the German Kurzarbeit system, which involves the government paying worker wages for short-time working.

The furlough scheme has cost £39.9 billion (€43.3 billion) up to September 20 and has helped over 10 million people who are unable to work owing to the economic consequences of the pandemic.

Under the original scheme, the government paid 80% of people wages, up to a cap of £2500 per month for furloughed employees provided they did not work at all, but companies have contributed to the costs since August.

The scheme has become more flexible in the preceding months and has allowed people to return to work part-time. More than 3 million people are still supported by it.

The chancellor also met with the CBI employers' group and Trade Union Congress (TUC) last week to discuss options, with both groups pitching their own ideas

Carolyn Fairbairn, director-general of the CBI, said it was now “desperately urgent” to announce a successor to the government’s job-retention scheme.

The CBI's idea is a plan of action to be put in place by November 1, would be available to all companies and would persist for a full year.

It would involve a state subsidy provided the company pay 50% of their employees wages.

The company would foot the full bill for hours worked by an employee, but for non-working hours the bill would be shared, with a third paid by the company, a third paid for by the Treasury and a third foregone by the employee themselves.

Mr Sunak announced he found this scheme attractive as it would allow the government to keep people who still have jobs in work, even if only for a part-time basis.

All in all, the scheme would be cheaper than the furlough scheme by costing hundreds of millions of pounds a month down from the average of £4 billion (€4.3 billion) the Treasury spends on the furlough scheme.

The TUC's scheme is also similar to the CBI's in that it would also apply to those who are working reduced hours.

However, under their scheme, workers would retain 80% of their wages for the time they are not working, or 100% if they are on minimum wage. 

Mr Sunak has announced that he believes the current furlough scheme keeps workers in "suspended animation," with taxpayers covering wages for jobs that no longer exist and is set on replacing it.

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