The UK Treasury has been criticised by business leaders, MPs and union chiefs over its deliberate failure to publicise rules allowing companies to apply for furlough pay for staff self-isolating with Covid-19 during the pandemic.

The department had instructed officials to conceal a little-known provision in the job support scheme which covered sick pay for those forced to quarantine because of the virus, according to emails between senior civil servants disclosed by the Politico website.

One official complained the Treasury was blocking guidance for employers on how to access the money. “Furlough can be used to cover self-isolation, but [the department] are reluctant to say this explicitly in guidance because it could lead to employees being furloughed who do not need to be,” they wrote in an email. “This is a live issue being worked through.”

The individual expressed concerns that the better-known Test and Trace Support Payment system, which offered up to £500 a week for those isolating, was insufficient for many. “Incentive payments are too low to incentivise employees to take tests due to risk of loss of income,” the person said.

Companies are still able to make furlough claims until the scheme closes at the end of September.

Craig Beaumont, external affairs chief at the Federation of Small Businesses, said the revelation was “a shocker”.

“The idea that you could maintain livelihoods rather than the small amounts available under SSP [Statutory Sick Pay] would have helped immensely,” said Beaumont.

“We were relying on SSP rebate when there was a better scheme that we didn’t know we could recommend. We think the government has been advising that companies should not use furlough for short periods of absence,” he added.

Labour also criticised the apparent deceit by Treasury officials. “It is shameful and reckless that the chancellor ignored professional advice and put countless people and workplaces at unnecessary risk when he had the opportunity to help,” said shadow chief secretary to the Treasury Bridget Phillipson.

The Treasury said: “It has always been clear that the purpose of the furlough scheme is to support jobs — we’ve been upfront about that from the start. The guidance sets out that the scheme is not intended for short-term absences from work due to sickness or self-isolation.

“We have a specific support package in place for those self-isolating due to coronavirus, including £500 one off payments for those on low incomes.”

So far £65bn has been spent on the policy known as the coronavirus job retention scheme.

“If an employer wants to furlough an employee for business reasons and they are currently off sick then they are eligible to do so as with other employees. This has been set out in guidance since April last year,” the Treasury added.

But Joe Clarke, national officer for Unite, the union, called the revelation “absolutely disgusting” and the government’s behaviour reckless.

“The government cynically suppressed this information from businesses at a time when over 1,000 people a day were dying from Covid,” he said.

The decision will have led to increased infections, cost lives and led to longer than necessary lockdowns, he argued, adding: “It is simply astonishing that the government had in place measures to tackle the problem of poverty while self-isolating but cynically decided not to tell anyone about it.”