The furlough scheme has supported millions of jobs, paying up to 80 per cent of wages for workers whose jobs have been impacted by the pandemic.
After being extended multiple times, the Coronavirus Job Retention Scheme – to give it its official title – was set to end on 30 April.
However, after some not-so-subtle hints that another extension may be on the way, the government confirmed it will now end on 30 September.
Employees will continue to receive 80 per cent of their salary for hours not worked, but unions and industry warned that the chancellor is risking jobs by requiring employers to contribute 10 per cent towards pay in July and 20 per cent in August and September while the state covers the rest.
The additional contributions will coincide with the planned lifting of lockdown restrictions which it is hoped will also bring increased revenues for businesses. All dates for easing are subject to change and are dependent on progress with bringing the virus under control.
The extra financial burden will give employers difficult decisions to make about whether to keep on staff.
Meanwhile, more than 600,000 self-employed people excluded so far from the government’s support package will be able to claim direct cash grants, as the government’s self-employment income support scheme (SEISS) is extended to cover those who began working for themselves in 2019-20.
Furloughed staff can continue to work part-time with their employer paying only for the hours they are needed.
Employers pay National Insurance and pension contributions for all of the furloughed staff member’s hours, including those not worked.
Mr Sunak will tell MPs: “First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis.
“Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that.”
Labour said Mr Sunak could have made today’s announcement long ago, but had denied businesses certainty for months in order to be able to grab the limelight on Budget day, just eight weeks before furlough was due to expire at the end of April.
The latest extension came after the chancellor dropped a clue in an interview on Sunday. Asked about the scheme by Sky News’s Sophy Ridge, Mr Sunak said he would do “whatever it takes” to support workers.
“I’m not going to comment on specific policies but I want to make sure people realise that we are going to be there to support them and if you look at our track record we went big, we went early and there’s more to come next week,” he said.
Kwasi Kwarteng, the business secretary, went further on Tuesday, appearing to confirm that the furlough scheme will be extended.
“I think the Chancellor has already indicated that we will be extending furlough,” he said.
“I think that has been part of a public announcement. I think there will be other measures that we will see tomorrow.”
He told BBC Radio 4’s Today it was a “fairly good assumption that while lockdown persists there will be additional support”.
Abruptly ending the furlough scheme, which has been the central plank of the government’s economic response to Covid, while restrictions are still in place, would have risked causing a sharp rise in unemployment.
Official figures show the number of furloughed workers rose by 700,000 to 4.7 million in January during the third lockdown.
However, experts have also warned that keeping a blanket measure in place which protects some jobs that may not have a future is damaging for the economy in long term.
Mr Sunak will lay out details of the government’s latest job support plans in the Budget at 12:30 on Wednesday.
