There has been welcome news in the last few days that the government`s furlough scheme is going to be extended until October. The chancellor Rishi Sunak took this unprecedented step probably with great reluctance considering the eye-watering sum of money this is going to cost, but it had to be done to prevent huge job losses over the coming months.
7.5 Million Workers Furloughed
This extension to the scheme is a pointer as to how long the government expects this crisis to envelop the UK and the wider world. A staggering 7.5 million workers are at present being paid under this scheme but the chancellor is steadfastly standing firm by extending the scheme until October to give businesses the best opportunity to survive the crisis and keep their employees.
Sunak was quoted in an article in The Guardian as saying: “We already know that many people have lost their jobs, and it breaks my heart. We’ve seen what’s happening with universal credit claims already. This is not something that we’re going to wait to see; it’s already happening.”
He added: “There are already businesses that are shutting. There are already people who have lost their jobs. And as I said, that’s heartbreaking to me and that’s why I’m working night and day to limit the amount of job losses.”
The Cost To The Taxpayer Is Enormous
In the same article Paul Johnson, director of the Institute for Fiscal Studies, commented that the furlough scheme is likely to cost the taxpayer upwards of £80 billion:
“To put that in context, in eight months, that is more than we spend on the education system in an entire year, it’s many times what we spend on the police, it’s many times more than we spend on social care, it’s about half what we spend on the whole NHS in a year,”
Businesses Will Share The Burden As Scheme Unfolds
But of course the chancellor will be expecting businesses to contribute and share the burden as the scheme unfolds, whether the majority of businesses can or will support this remains to be seen. Here is what shadow chancellor Annaliese Dodds is quoted as saying in the same article:
“The government must clarify today when employers will be required to start making contributions, and how much they’ll be asked to pay. If every business is suddenly required to make a substantial contribution from the 1 August onwards, there is a very real risk that we will see mass redundancies.”
For help and advice on the effects of the furlough scheme on your business and how best you can negotiate the next few months, please give our experienced financial team here at WHR Accountants a call by ringing us on 028 3752 2909.