The furlough scheme that pays 80 per cent of the wages of people who cannot work because of the coronavirus pandemic and lockdown has been extended until the end of March 2021.
Chancellor of the Exchequer Rishi Sunak announced the move in the House of Commons on Thursday afternoon, on the day the new lockdown rules came into force in England.
He said the furlough change will apply across the whole of the UK.
The measures mean employers will have to pay just national insurance and pension contributions for staff who cannot work.
The furlough scheme initially ended at the end of October having been wound down to 60 per cent of pay.
Mr Sunak then extended it into December in the face of the new lockdown and tiered restriction rules.
He has now extended it into next year ‘to provide certainty’.
He told the Commons: “We can announce today that the furlough scheme will not be extended for one month, it will be extended until the end of March.
“The Government will continue to help pay people’s wages up to 80% of the normal amount. All employers will have to pay for hours not worked is the cost of employer NICs and pension contributions.
“We will review the policy in January to decide whether economic circumstances are improving enough to ask employers to contribute more.”
Mr Sunak also outlined support for those who are self-employed.
He told MPs: “For self-employed people, I can confirm the next income support grant which covers the period November to January will now increase to 80% of average profits up to £7,500.”
And Mr Sunak told the Commons “upfront guaranteed funding” for the devolved administrations will increase by £2 billion.
He said: “I also want to reassure the people of Scotland, Wales and Northern Ireland. The furlough scheme was designed and delivered by the Government of the United Kingdom on behalf of all the people of the United Kingdom, wherever they live.
“That has been the case since March, it is the case now and will remain the case until next March.
“It is a demonstration of the strength of the Union and an undeniable truth of this crisis we have only been able to provide this level of economic support because we are a United Kingdom.
“And I can announce today that the upfront guaranteed funding for devolved administrations is increasing from £14 billion to £16 billion.
“This Treasury is, has been and will always be the Treasury for the whole of the United Kingdom.”
Mr Sunak said he had to make “rapid adjustments” to the Government’s economic response to Covid-19 pandemic owing to how the virus has spread.
He told the Commons: “I know that people watching at home will have been frustrated by the changes the Government has brought in during the past few weeks.
“I have had to make rapid adjustments to our economic plans as the spread of the virus has accelerated.”
Mr Sunak concluded his Commons statement by giving a lengthy justification for the furlough extension, claiming the second lockdown in England was the “only viable solution left to protect our NHS”.
He told MPs: “And so given these changed public health restrictions and the economic trauma they would cause in job losses and business closures, I felt it best to extend the furlough scheme rather than transition at that precise moment to the new job support scheme.
“Political opponents have chosen to attack the Government for trying to keep the economy functioning and to make sure the support we provide encourages people to keep working.
“And they will now no doubt criticise the Government on the basis that we have had to change our approach. But to anyone in the real world that’s just the thing you have to do when the circumstances change.
“We all hope for the best but make sure we plan for any eventuality.”
The Chancellor added he would “leave it to the people” to decide whether the Government’s actions were right, adding: “What I know is the support we’re providing will protect millions of jobs. What I know is that it’s never wrong to convey confidence in this country and our economy through our words and actions, and what I know is today’s announcement will give people and businesses up and down our country immense comfort over what will be a difficult winter.”