Covid lockdown UK: Rishi Sunak ‘to extend furlough until July’ in next week’s Budget

Chancellor Rishi Sunak is set to extend the Government’s massive furlough scheme until at least July after Prime Minister Boris Johnson unveiled an ultra-cautious roadmap for easing the third lockdown.

The Chancellor is expected to pump huge sums of money at next week’s Budget – the first the Government has presented to the Commons since the start of the pandemic – into the devastated economy.

Furlough, which is currently due to stop at the end of April, was implemented during the spring outbreak to prevent millions of job losses and businesses which have been forced to close from going under. 

The Treasury has already spent more than £300billion supporting UK plc through the crisis, with Mr Sunak keen to placate the rebellious Tory backbench by vowing to balance the books once the pandemic is over. 

However, senior government sources have now confirmed that bailouts will continue into the summer, with one telling the Sun: ‘Obviously Rishi will be making a big announcement about this next week. But it is safe to say that Covid measures aren’t going to be turned off.’

Yesterday the Prime Minister had strongly hinted that the scheme would be extended, as he insisted the Government will ‘continue to do whatever it takes to protect jobs’ for the ‘duration of the pandemic’. 

Mr Sunak has told Tory MPs that support for some businesses will need to last beyond the summer, particularly for those that will not open any time soon, such as nightclubs. 

They added that the Chancellor will present the furlough as an ‘offset’ to the tax rises as he delivers his second Budget on March 3, and is expected to ‘lay down markers’ for future tax rises to start balancing the books.  

Corporation tax is set to rise from next year from 19 to 24 per cent, in staggered stages. High earners are also likely to be hit.

An announcement is also expected on freeports, including naming the first ‘three or four’, a source said. The Autumn Budget is expected to be used to announce tax rises to come in from 2022.   

Mr Johnson yesterday unveiled an exit strategy from the third national lockdown, with schools to return from March 8 but businesses to continue facing damaging curbs for many months to come. 

Pubs and restaurants will be able to serve outdoors from April 12, and gyms can reopen. However, the hospitality sector will not be allowed to operate indoors until at least May, and it is not until June that legal social distancing restrictions might be removed. 

In the Commons, Mr Johnson stopped short of confirming outright that support for businesses will be extended, with Mr Sunak due to deliver his Budget next week. But he nodded to the impending closure of the furlough scheme at the end of April, as well as the fact other support is due to lapse.

‘In view of these cautious but, I hope, irreversible changes, people may be concerned about what these changes mean for the various support packages for livelihoods, for people and the economy,’ Mr Johnson said.

‘So I want to reassure the House we will not pull the rug out – for the duration of the pandemic the Government will continue to do whatever it takes to protect jobs and livelihoods across the UK.

‘And the Chancellor will set out further details in the Budget next Wednesday.’

Mr Sunak is also looking at extensions to business rates relief that are due to run out in March.

Mike Cherry, chairman of the Federation of Small Businesses, told the Times: ‘The chancellor must deliver on the prime minister’s ‘whatever it takes’ pledge at next week’s budget. 

‘On one side of the coin we have continued restrictions; on the other, we need corresponding business support. 

‘Business support measures need to reflect this road map to avoid forcing the great businesses of tomorrow under before they’ve had a chance to realise their potential.’ 

The roadmap document published by the government yesterday underlines the scale of the hit from coronavirus, which has caused the worst recession in 300 years.

It points out that young people in particular have been hammered by the lockdowns. 

‘Businesses and their suppliers are suffering from enforced closures and restrictions on social contact – particularly aviation, pubs, restaurants and hotels, sports and events, arts, entertainment and conferences – and so are their suppliers,’ the blueprint said.  

‘Even though the Government has provided over £280billion in financial support since March 2020, jobs have inevitably been lost given the unprecedented challenge of the pandemic.

‘The number of employees on payroll fell by 828,000 between February and December 2020.

‘The pain has not been felt equally. Staff in the hardest-hit sectors, such as hospitality, are more likely to be young, female, from an ethnic minority, and lower paid.  

‘The unemployment rate for those aged 18 to 24 increased from 10.5 per cent in the three months to February 2020 to 13.2 per cent in the three months to November.’ 

Shadow chancellor Anneliese Dodds tweeted: ‘Indoor hospitality won’t reopen until 17 May at the earliest – more than a month after they have to start paying business rates and more than two weeks after furlough ends.

‘Businesses needed certainty today. Instead this Conservative Government has left them in the lurch again.’

Union warned workers have been left worrying about their jobs after the PM’s announcement because some businesses will not be able to reopen before the furlough scheme ends.

TUC general secretary Frances O’Grady said there could be a gap of months before workers know if they still have a job.

‘The Government must stop dithering and delaying and extend the full furlough scheme for at least the rest of 2021, and it must (give) urgent support for the self-employed.

‘With jobs and livelihoods hanging in the balance there is no reason to keep workers and businesses waiting.

‘We need a plan for supporting the parts of the economy hit hardest by repeated lockdown restrictions, like hospitality, retail, aviation and the creative industries.

‘Ministers cannot watch from the sidelines as companies go the wall.

‘If the Prime Minister wants to make sure we never go into lockdown again, he must do a better job of keeping people safe as they return to workplaces in large numbers.

‘That means beefing up workplace safety guidance so that it’s in line with the latest science and cracking down on employers who put staff in danger,’ she said.