Chancellor rishi sunak is drawing up plans for a new programme to subsidise workers wages, as pressure mounts to avert mass unemployment when the governments 39bn job retention scheme ends in october.
Mr sunak has vowed to be creative and is looking at whether the treasury and companies could share the cost of topping up the wages of staff who can only be employed part-time because of the coronavirus pandemic.
Boris johnsons plan for six months of new covid-19 restrictions to tackle a resurgence of the virus has increased the pressure on mr sunak to avoid what labour leader keir starmer has predicted will be a jobs disaster when the furlough scheme ends on october 31.
The prime minister told mps on tuesday: we will continue to put our arms around the whole workforce of the uk and to protect jobs and livelihoods, but we also want to see those businesses continuing and jobs being created.
Mr sunaks colleagues said a range of support measures were on the table and no decisions had been taken, but several people briefed on the issue stated work was under way on a number of options to subsidise workers wages.
The treasury is looking at schemes in france, germany and spain that help companies that cannot bring back employees on a full-time basis because of the economic downturn.
Government officials are examining whether the state can subsidise the wages of employees who can work at least 50 to 60 per cent of their normal hours. the treasury declined to comment.
Mr sunak met the cbi employers group and trades union congress leaders last week to discuss options. both have proposed new job support schemes.
We are working with them behind the scenes, said one government official.
Carolyn fairbairn, director-general of the cbi, said it was now desperately urgent to announce a successor to the governments job-retention scheme.
The furlough programme has cost 39.3bn up to september 20, and has supported more than 10m people unable to work because of the impact on the economy of covid-19 restrictions.
Under the programme, the state originallypaid 80 per centof wages up to a cap of 2,500 a month for furloughed employees so long as they did not work at all, but companies have contributed to the cost since august.
The furlough scheme has been made more flexible, allowing people to come back to work part-time, and about 3m people are still supported by the programme.
The cbi has outlined a new scheme, to be in place by november 1, which would be available to all companies and last a year.
It would involve a state subsidy if an employer was able to offer workers at least 50 per cent of their normal hours.
The company would pick up the full wage bill for the hours worked by an employee. but for non-working hours the bill would be shared, with a third paid by the company, a third by the treasury and a third foregone by the employee.
The attraction for mr sunak of a cbi-style scheme is that it would keep people in the workplace and support jobs that were still viable, if only on a part-time basis.
The scheme would also be much cheaper than the furlough programme by costing hundreds of millions of pounds a month. the furlough scheme cost about 4bn in the most recent month.
The financial times estimated that if 3m people joined a cbi-style work subsidy scheme it could cost the treasury about 500m each month.
Under the cbi plan, companies could choose whether to participate in its proposed work subsidy scheme or take the 1,000 job-retention bonus offered by the government to businesses that take back on to their payroll people currently furloughed.
The job-retention deal proposed by thetucis similar to the cbis plan in that it would also apply to employees who are still working for a minimum proportion of their normal hours.
However, it would be more generous because workers would continue to receive at least 80 per cent of their pay for the time they are not working, or 100 per cent if they are on the national minimum wage.
Mr sunak has made it clear he believes the furlough scheme is now keeping people in suspended animation, with the taxpayer effectively paying for jobs that no longer exist.
The chancellor has resisted labours proposal for new sectoral furlough schemes for parts of the economy most affected by continued restrictions. he believes defining which individuals should benefit would be complex.