Nick Hobden, Head of Employment, shares his views on the Chancellor’s announcement in the Budget about the extension of the furlough scheme.
“The furlough scheme that has cost Britain £53billion will be extended to the end of September as the Chancellor as declared that he will do 'whatever it takes' to help the economy recover. He has listened to business organisations concerns about a cliff edge into a sea of mass redundancies at the current end of the scheme, with the economy still struggling under lock down conditions and has averted that cliff edge.
The scheme will be extended from the current end of April cut off date for a further 5 months and over 3 months past the end of the last of the unlocking measures of the lockdown in June. This will make the furlough scheme an 18 month programme since 19 March 2020.
At its peak 9 million furloughed employees have been in receipt of 80% of their pay capped at £2,500 since the scheme was first introduced. Although many returned to work as lock down was lifted last year, a fresh wave were put on furlough in January, double the number in October, as the new lock down measures were imposed on 5 January.
Rishi Sunak has also reintroduced plans to have employers pay more towards the scheme from 1 July, when the Government’s contribution will reduce to 70% and employers will pay 10%. From 1 August, the contributions from Government and employers will be 60% and 20% respectively.
Self-employed workers will also benefit from another round of support with the Treasury paying them 80% of profits. The scheme will be extended to cover 600,000 workers who did not qualify before because they did not begin trading until 2019.
The National Minimum Wage is set to rise this April to £8.91per hour.
On personal income tax, although tax rates will not rise, Mr Sunak will freeze personal allowances, after the modest rise from 6 April 2021 until 2026. This means that some 1.3 million people will be taxed for the first time and £1m will pay tax at a higher rate. Raising £8bn more revenue for the Treasury by 2025-26 to help down the debt incurred in paying for the spiralling costs of the furlough scheme.”