Covid has cost so much extending furlough will be a drop in the ocean

Ahead of the budget on 3 March, Nigel Morris, employment tax director at MHA MacIntyre Hudson, says extending the furlough scheme is the right call.

But with no sector distinctions and ought to go hand in hand with a return of the Job Retention Bonus scheme.

Morris warned that we will all be paying for the cost of the pandemic for quite some time, and extending the furlough scheme is a drop in the ocean.

Morris said, “Extending the furlough scheme until the summer, as the Chancellor looks likely to do, is certainly the right call. We will all be paying for the cost of the Covid-19 support measures for a long time, and extending this scheme a little longer won’t massively increase this bill. In addition to an extension though, employers need further incentives to get furloughed employees back to work. The Chancellor also needs to think about job support over the long-term and not just for now.

“The best way to complement a CJRS (aka furlough) extension is to bring back a version of the Job Retention Bonus scheme. This would be especially helpful to those employers who need to phase the return of their employees back to work. The prospect of a one off payment when furloughed employees return to work would give them an extra ‘crutch’ if they need to fund furlough and employer’s NIC after April 2021 until their businesses are able to fully open again.

“Looking ahead, it is surely worth the Chancellor’s time to consider whether some kind of furlough scheme should become permanent, perhaps along the lines of arrangements available in France, Germany or the USA. With the rise of new Covid-19 variants other, hopefully less restrictive, lockdowns in the autumn or winter can’t be ruled out. The UK should think about drawing up plans for a more long-term but less generous retention scheme until we are totally clear from the pandemic.

“Some other ideas that the Chancellor might try but are less advisable include making furlough sector specific, to account for the especially severe impact of the lockdown in areas such as travel and hospitality. This has always been a popular solution but is actually fraught with complexity and is unlikely to happen. The furlough scheme was introduced at very short notice and required the building of new IT systems to help counter erroneous or fraudulent claims. It is hard to see how the system could be quickly reconfigured to check that only employers from the right sector are allowed to claim. Especially as we want to avoid any abuse of the system.”