‘Local furlough’ scheme will cover two-thirds of wages

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Two-thirds of the wages of workers in pubs, restaurants and other businesses forced to close by local lockdowns will be covered by the government under a new ‘local furlough’ scheme, chancellor Rishi Sunak will announce today.

According to reports, the scheme will remain in place for as long as businesses are covered by local restrictions to prevent the spread of Covid-19.

Next week pubs, cafes and restaurants in many areas in the north of England will be closed, causing widespread concern that more jobs in the already struggling hospitality sector may be lost. Pubs in many areas of Scotland will also be closed.

The new local furlough scheme is significantly more generous that the Job Support Scheme announced by the chancellor last month – which will see the government pay 22% of wages and the employer 55% of wages for employees who have had their hours cut as a result of the crisis. However, the support is still far below the 80% of wages covered by the Coronavirus Job Retention Scheme, which closes on 31 October.

A Treasury spokesperson said the new scheme will be announced later today. The chancellor will say: “The next stage of the job support scheme will protect jobs and provide a safety net for those businesses that may have to close in the coming weeks and months.”

The government has been heavily criticised for its plans to close down swathes of the northern economy in order to curb infections.

Labour’s shadow business minister Lucy Powell told BBC Breakfast: “There’s a huge amount of frustration, and frankly fury, up here in the north at the way we are being treated by this government. They seem to be sitting in offices in Whitehall, striking a red pen through large swathes of our economy and our society.”

She said the local furlough scheme would not be sufficient to help affected workers and said cash grants for businesses were needed “as a matter of urgency”.

Greater Manchester mayor Andy Burnham said the “damage to the economy will be deep and long lasting” if the government fails to extend the full furlough scheme.

Steve Rotheram, mayor for the Liverpool city region, agreed that financial support on a “similar scale” to the original furlough scheme was needed.

“If it was right then, it certainly is now — so we need to be seeing local furlough schemes, business grants and financial support for the self-employed and those who cannot work from home,” he told The Times. “Otherwise, the money spent earlier in the year to protect jobs and businesses earlier in the year will have been wasted.”

The abrupt changes to the support on offer mean that employers face further uncertainty, said Musab Hemsi, a partner at legal firm LexLeyton.

“It is clear that the economic measures are a response to increased pressure from local authority and business leaders who deem the local lockdown measures to be fatal to businesses,” said Hemsi. “The lack of clarity and abrupt changes around various rules mean many businesses and workers face an increased threat of redundancy and potentially fines for non-compliance.

“Remember we still await guidance on how employers qualify for and utilise the Job Support Scheme, scheduled to commence on 1 November 2020. It is vital that the chancellor provides immediate clarity on all of these proposals and how they will co-exist with the other current support. Failure to do so will see the landscape of many British high streets further deteriorate.”