THE UK Government’s furlough scheme is to be extended until the end of October with no proposed reduction in the level of support for workers on it, Rishi Sunak has announced.

Responding to an Urgent Question asked by Labour in the House of Commons, the Chancellor explained that the Job Retention Scheme would run for another four months.

Until the end of July, there would be no changes but from the start of August until the end of October the scheme would change to facilitate a sharing of the burden with employers of paying 80% of people’s salaries, up to £2,500 a month.

New statistics published today revealed the furlough scheme – described by Mr Sunak as a “world-leading economic intervention” - had protected 7.5 million jobs and supported almost one million businesses.

The Institute for Fiscal Studies calculated that extending the scheme in its current form for five months to the end of July would add an extra £10 billion, bringing the total by then to around £60bn. The further three-month extension would push the overall cost higher.

He said all sectors and regions of the UK would continue to be covered with greater flexibility to support the transition back to work.

The Chancellor told MPs: "Employers currently using the scheme will be able to bring furloughed employees back part-time. And we will ask employers to start sharing with the Government the cost of paying people's salaries. Full details will follow by the end of May."

But Mr Sunak, who turned 40 today, went on: “I want to assure people today of one thing that won't change. Workers will through the combined efforts of Government and employers continue to receive the same level of overall support as they do now at 80% of their current salary up to £2,500 a month.

"I'm extending the scheme because I won't give up on the people who rely on it. Our message today is simple: we stood behind Britain's workers and businesses as we came into this crisis and we will stand behind them as we come through the other side."

Later, when asked if the scheme could be extended beyond October, the Chancellor told the House that everything would be kept under review, noting: “But my expectation is by then the scheme should end. As I have said before we have stretched and strained to be as generous as possible to businesses and workers, which is why we have made the decision we have made today, which is important to me personally.

“But, of course, as I have also said, this scheme is expensive. It is the right thing to do; the cost of not acting would have been far higher.

“But it is not something that can continue indefinitely into the future. Eight months of total support is a considerable amount of time and, now we have a plan from the Prime Minister with a path to reopening those parts of our economy that are closed, I believe we can get the country back on track, get people back into work and this scheme will help them to do it in a measured way, a phased way, and protect as many jobs as possible.”

Nicola Sturgeon gave the announcement a cautious welcome.

Speaking at the Scottish Government’s daily briefing on Covid-19, the First Minister said: “An extension to October is welcome. Hopefully, with the caveat that I’ve not seen the detail yet, on the face of it that should avoid cliff edges, where companies have to start redundancy processes because they’re worried about the furlough scheme coming to an end within the timescale that they have to consult around redundancies.

“So, it gives companies more time to do that and, hopefully, over that period we are going to see the further suppression of the virus and that, albeit gradual and perhaps relatively slow restart of the economy.”

She added: “From what I have been able to gather so far, the Chancellor’s announcement is welcome but I will wait and see the detail before commenting any further on it.”

Jackson Carlaw, leader of the Scottish Conservatives said: “We all know that the Covid-19 pandemic represents a colossal economic threat as well as a public health crisis.

“The Chancellor has today given millions of workers across Scotland economic security right through until October.

“Introducing part-time flexibility into the scheme in July is something that businesses have been asking for and is very welcome.”

Mr Carlaw said the simplicity and clarity of the Chancellor’s message was striking.

“This crisis is not over, there is still a long road ahead, but Scottish employees and employers have been given an enormous safety net,” he added.

In the Commons, Anneliese Dodds for Labour said many were taken aback by comments attributed to Government officials suggesting people need to be "weaned off an addiction" to the furlough scheme.

The Shadow Chancellor said she had only heard about the Government’s changes "in the last few seconds" and will examine them "very, very carefully".

Ms Dodds said people do not want to be furloughed, adding in the Commons: "It's critically important they are not penalised for that choice. We welcome the flexibility mentioned, we've asked for this repeatedly."

Mr Sunak replied: "The use of the word 'addiction' is not one I have ever used and not one I agree with.

"Nobody who is on the furlough scheme wants to be on this scheme. People up and down this country believe in the dignity of their work, going to work, providing for their families, it's not their fault their business has been asked to close or asked to stay at home.

"That is why I established this scheme to support these people and their livelihoods at this critical time."

Alison Thewliss for the SNP asked the Chancellor if he recognised that removing or reducing wage support levels in the furlough scheme prematurely would increase Universal Credit claims and “force workers back to work before it's safe for them and risk a second peak?"

Mr Sunak replied: "Just to clarify, there will be no reduction in the level of support for those on the scheme. It's crystal clear those on the scheme have that reassurance; the level of support that they receive will not be changed."

Tory backbencher Mel Stride, who chairs the Commons Treasury Committee, said: “The extension of the furlough scheme, allowing furloughed employees to work part time, and with employers asked to contribute are all welcome steps from the Chancellor."

However, he said the devil would be in the detail and the committee would carefully scrutinise the changes.

“The Chancellor also said that there will be no changes to the scheme until July. This will be worrying for those who continue to fall through the gaps of the Government’s support measures such as the lack of furlough support to help cover dividend income generated through self-employment."

Outwith Westminster, Liz Cameron, Chief Executive of the Scottish Chambers of Commerce hailed the furlough scheme extension as “great news”.

She said: “Businesses and employees across Scotland will be extremely relieved by the Chancellor’s decision to extend the furlough scheme to October rather than face a cliff edge with its originally planned withdrawal at the end of June.

“This direct employee financial support has been a lifeline which has enabled many jobs to be retained rather than businesses having to face making massive redundancies. As we begin to consider a ‘return to workplace’ plan to restart the economy, flexibility in these schemes will be paramount to protecting jobs until businesses are able to trade normally once more.”

Ms Cameron said the SCC looked forward to seeing further detail on the proposed employers’ contribution.

“We would ask that this takes into consideration, particularly for SMEs, their ability to pay contributions depending on how quickly their income recovers as lock down eases. Trading conditions will differ depending on location and sector and the flexibility of the furlough scheme must take these factors on board.

“We will continue our engagement with the Treasury to make sure business support remains flexible and accessible for Scottish businesses,” she added.

Andrew McRae, the Federation of Small Business Scotland’s Policy Chairman, said: “Today’s shrewd decisions from the Chancellor will give thousands of large and small Scottish employers the right sort of flexibility. The move to allow operators to partially furlough their staff while they consider how to get back up to speed should mean more businesses have the right tools at their disposal.

“In the coming weeks, smaller firms will want to understand the next steps for the scheme. Policymakers will need to carefully consider how to co-ordinate financial support for businesses with advice to firms about how and when to reopen safely,” he added.

Dame Carolyn Fairbairn, the CBI Director-General, said firms would want more detail and asked for ministers to be willing to be flexible if there were a second peak.

“Extending the furlough to avoid a June cliff-edge continues the significant efforts made already and will protect millions of jobs.

"Introducing much-needed flexibility is extremely welcome. It will prepare the ground for firms that are reawakening, while helping those who remain in hibernation. That's essential as the UK economy revives step-by-step, while supporting livelihoods."

Edwin Morgan for the Institute of Directors said plans for part-time returns by the Government were welcome.

"A part-time furlough provides a much-needed launch ramp so businesses can start to get back up to speed. A more flexible approach will allow firms to raise activity levels in tandem with demand, helping to avoid cashflow challenges.

"We now need further clarity around employers' contributions. Many firms that would normally be on strong footing are still in dire straits. The extension puts yet more onus on helping those who have been left out in the cold. Countless small company directors have found scant support, and Government shouldn't turn a blind eye to them," he added.