A blanket withdrawal of the government’s furlough scheme threatens to put a “python-like” squeeze on jobs in areas of the economy hardest hit by the coronavirus pandemic, the chancellor has been warned.
Rishi Sunak risks making a “historic mistake” unless he abandons his “one-size-fits-all” approach to the phasing out of financial support, Labour has said.
However, the government has rejected the criticism and said the “unprecedented” employment assistance during the COVID-19 crisis was “comprehensive and generous”.
The opposition urged action ahead of the start of the staged ending of the job retention scheme, set up as part of the emergency response to the coronavirus, which led to a nationwide lockdown.
Employers will having to begin paying National Insurance and pension contributions for their staff from 1 August.
In September, companies will have to pay 10% of furloughed employees’ salaries, rising to 20% in October when the scheme finishes.
The chancellor has also offered to give a £1,000 bonus for each worker that companies bring back from furlough and employ through to January next year, although critics warn such incentives “look too small to be effective given the uncertainty about the economic outlook”.
Speaking ahead of the launch of a jobs campaign by Labour, shadow chancellor Anneliese Dodds said: “The chancellor’s refusal to abandon his one-size-fits-all withdrawal of furlough is a historic mistake that risks a python-like squeeze on jobs in the worst-hit sectors.
“The reward for months of hard work and sacrifice by the British people cannot be a P45.
“It’s not too late for the chancellor to see sense, change course and support the businesses and sectors that need it most. But, even if he does, there is still much to do.”
The party has urged the government to reform the furlough scheme so that it supports jobs in the worst-hit sectors and targets aid to struggling industries.
But defending its record, a government source said the administration had “worked tirelessly during this crisis to protect jobs, livelihoods and businesses”.
They added: “At every step we have acted at scale and at pace to ensure as many people as possible are supported during this difficult time.
“The furlough scheme is unprecedented and has so far supported the wages of 9.5 million people, at a cost of £31.7 billion and will run for eight months in total.
“It is not a ‘one-size-fits-all’ policy, it is the most comprehensive and generous version of support that can be provided.”