Chancellor urged to taper furlough payments once lockdown eases

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Chancellor urged to taper furlough payments once lockdown eases
(Image: Chris Radburn/PA Wire)
// Lib Dems propose the Treasury pays 50% of employees’ salaries in the first month after they can return to work
// By the 3rd month, the government would pay 30% of their salaries and by the 4th month, the company pays the full salaries
// Lib Dems believe many firms will not have the cashflow to pay employees’ full salaries after lockdown

Chancellor Rishi Sunak has been urged to introduce a “wage subsidy package” to taper furlough payments when lockdown measures are eased and businesses begin to recover.

The Liberal Democrats have suggested the Treasury pays 50 per cent of employees’ salaries on the Job Retention Scheme in the first month after they have returned to work.

By the third month back in work, the government would pay 30 per cent of their salaries, under the proposals.


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Companies would then be expected to pay the full wages by the fourth month.

The party believes many firms will not have the cashflow to pay employees’ full salaries when the lockdown measures are eased and workers are able to return to work, and may instead opt for redundancy.

Under the UK Government’s Job Retention Scheme, which is due to run until the end of June, the Treasury pays 80 per cent of wages of workers laid off because of the current crisis, up to a maximum of £2500 a month.

Acting Lib Dem leader Sir Ed Davey said: “The government furlough scheme has done a good job at helping thousands of businesses through the lockdown, but the shadow of lockdown will be long, and the ‘new normal’ will be extremely challenging.

“Businesses and their staff need time to plan, and confidence the government will be there, ready to support.

“Our proposal for a ‘Safe to Return to Work’ scheme would give people that time and that confidence and help avoid further large-scale job losses.

“I’m grateful to my new business taskforce for this idea and all their advice for our proposals to Government for reforming business loans and improving support for start-ups.”

Juergen Maier, chairman of the Lib Dem coronavirus business taskforce and former chief executive of Siemens UK, said: “The advisory group are concerned that once the furlough scheme comes to an end, many businesses, large and small, will simply not have the cashflow to re-employ staff, as it will take time for the economy to recover.

“If firms then were forced to make staff redundant, leading to another significant rise in unemployment, that could break the economy’s ability to recover, just as we were trying to exit lockdown.

“I’m delighted that Ed and the Liberal Democrats are running with our recommendation, and I hope ministers will see it as a positive and constructive contribution.”

The news comes as applications for a new business loan scheme to help small companies through the coronavirus crisis opens today.

The “bounce back” scheme, announced by the Chancellor last month, offers loans of up to £50,000 to small businesses, 100 per cent backed by the government, interest and payment-free for the first year.

It will consist of a standardised form to speed up payments, although concerns over fraud have been raised due to the minimal checks.

Interest rates will be set at 2.5 per cent per annum after the first 12 months, the Treasury said.

Last week the Chief Secretary to the Treasury, Stephen Barclay, said he expected to see some companies approved for loans under the Coronavirus Business Interruption Loan Scheme (Cbils) switch to the “bounce back” scheme.

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