Coronavirus wage subsidies costing UK Treasury £22bn

The chancellor Rishi Sunak, has committed the government to extend the furlough scheme until the end of October.

The chancellor Rishi Sunak, has committed the government to extend the furlough scheme until the end of October.
Photograph: Jonathan Brady/PA

A third of the British workforce is receiving wage subsidies at a cost of almost £22bn to the Treasury, according to the latest government figures.

HMRC said that 1m employers had claimed £15bn for 8.4 million furloughed employees under the coronavirus rescue scheme between 20 April and 24 May.

Another 2.3 million self employed workers have made claims under a separate self-employment income support scheme at a cost of £6.8bn.

The combined total of 10.7 million workers represents a third of the UK’s 32 million-strong workforce that must stay at home and not work under the rules of furlough scheme, in which the government pays 80% of a workers’ wages up to £2,500 a month, until the end of July.

Rishi Sunak has won praise for implementing the two subsidy schemes covering employed and self-employed workers after studies showed that at least half the people covered would otherwise have been made redundant.

He has committed the government to extend the furlough scheme in some form until the end of October, but is not expected to reveal details until at least the end of this week.

Employers are braced for an end to the £2,500 subsidy for non-working staff and its replacement with a smaller subsidy that forces them to bring back workers part-time.

Employers groups have warned that a cliff edge at the end of July will lead to tens of thousands of redundancies.

The draft plans are understood to expect employers to contribute 20% of salaries while the government pays 60% up to a cap of 2,500 a month, down from the 80% employers receive at present. Employers will also be expected to pay national insurance contributions, which they are currently exempt from. 

The chancellor is also considering shutting the furlough scheme to new entrants, a move that will cap the bill to the Treasury, but also prevent employers from rotating staff who are currently not working with those who have spent recent weeks at work.

A study by the Institute for Fiscal Studies forecast that scheme would cost around £80bn by the end of October.

Simon Rothenberg, a senior manager at the accountants Blick Rothenberg, said the government’s plans to widen the job retention scheme to include part-time working could see widespread abuse and fraud.

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“With the widening of the job retention scheme to include part-time working, the temptation for employers to exaggerate claims, especially in times when they need cash desperately, is likely to increase.”

 He added: “This will make HMRC’s job in policing the scheme and auditing claims even harder and more time consuming, particularly for those working remotely.”

The Treasury has already become concerned at the potential for fraud after hundreds of complaints from employees that they have been made to work while their employer claimed the furlough subsidy.

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