MPs urge chancellor to extend furlough for struggling industries

A group of influential MPs have urged UK chancellor Rishi Sunak to “carefully consider” a limited extension to the government’s job retention scheme for struggling British industries.

The Treasury Select Committee on Thursday published its second report into the economic effects of the COVID-19 crisis, focusing on the challenges facing the UK as it enters its economic recovery phase.

The report said the chancellor should seriously consider sector-specific extensions to the government’s furlough programme, which is due to end in October.

READ MORE: Manufacturers call for furlough scheme extension

“The chancellor should carefully consider targeted extensions to the Coronavirus Job Retention Scheme and explain his conclusions,” Tory MP Mel Stride, chair of the Treasury Select Committee, said in a statement.

Over nine million people were furloughed at some point during the coronavirus crisis and the Office for National Statistics (ONS) estimates that 11% of the workforce remain on the job retention scheme — equivalent to around three million workers.

Some sectors are far more reliant on the programme than others — 40% of staff in the arts and entertainment industry remain on furlough, according to the ONS, and around 30% of the hotel sector and food industry are furloughed. By comparison, less than 4% of retail staff are still receiving government wage support.

READ MORE: 1 in 10 firms fear going bust due to COVID-19 debt

“The key will be assisting those businesses who, with additional support, can come through the crisis as sustainable enterprises, rather than focusing on those that will unfortunately just not be viable in the changed post-crisis economy,” Stride said.

“This requires a very difficult set of judgements; it is where careful analysis and creative thinking will be critical.”

Earlier this week Make UK, the lobbying group for the manufacturing sector, called for a furlough extension for industry, warning that key skills could be lost without government support.

READ MORE: Bank of England governor backs end of furlough scheme

Downing Street has so far resisted calls to extend the job retention scheme, which has cost the Treasury £35bn ($45.6bn) to date.

“You’re just keeping people in suspended animation,” prime minister Boris Johnson said at a press conference on Wednesday.

As well as urging flexibility on the the furlough scheme, the Treasury Select Committee report called on the chancellor not to raise taxes too early. The report said premature tax rises could “stifle economic recovery.”

READ MORE: UK pensions triple lock 'could cause chaos' in coming years

Concerns were also raised about the indebtedness of companies that have taken out COVID-19 support loans and the looming end to more generous universal credit benefits.

“As the Committee has said throughout the crisis, the chancellor must continue to show flexibility in his approach,” Stride said.

The report also repeated calls for the Conservative party to temporarily pause its “triple lock” on pensions, which has been a cornerstone of Tory policy for a decade. The triple lock — which binds state pensions contributions to inflation and wage growth — is likely to lead to spiralling costs in the coming years as wages bounce back from the crisis.