Britain faces a grim winter as Rishi Sunak warned of a jobs bloodbath and “tough choices” would follow his emergency Covid-19 economic plan.
Experts have warned “a lot” of people on the current furlough scheme could lose their jobs when the scheme ends.
And the new offer is much less generous than furlough – or as Mr Sunak put it in a press conference today, “more targeted.”
The new measures will see an end to furlough, were the government paid 70% of the salaries of some workers to stop firms folding.
Instead, the government will pay just 22% of normal wages for employees who return to work part-time.
Companies will be expected to pay 55% of the normal salary – despite employees only working for a third of their normal hours.
Mr Sunak warned unemployment will continue to rise despite the emergency measures.
The Chancellor told a Downing Street press conference: “I would be lying if I could try and give you precise numbers or time frames for what’s going to happen when. We’re dealing with unprecedented economic uncertainty.
“Unemployment is already rising and will continue to rise – that’s a complete tragedy. We’ve already lost 700,000 jobs. Those people’s security is now under threat.”
And he said it was “impossible” to say how many jobs the scheme would protect.
“It’s impossible for me to predict given the uncertainty of the exact shape of the labour market,” he said.
“When we started the furlough scheme it surprised everybody, economic commentators alike, the scale of the take-up of that.
“My expectation and hope is that this new scheme will be able to benefit large numbers of people and help protect their jobs through the difficult winter months, especially as demand is depressed in their companies.
“It’s not for me to sit here and make pronouncements upon exactly what job is viable or not but what we do need to do is evolve our support now that we’re through the acute phase of the crisis.”
The Resolution Foundation think tank said the scheme had “design flaws” which would only move a jobs “cliff edge” back a few months.
They said: “The scheme on its own in fact gives firms a strong incentive not to engage in short hours working, because it requires employers to contribute one third of the wages for the period when an employee is not working”
And Paul Johnson, of the Institute for Fiscal Studies warned the scheme was less generous than furlough, and would likely lead to “a lot” on furlough losing their jobs.
He said: “This is a very big change from furlough.
“Less generous. Only open to those who are working a third of normal hours. Understandable given need to adapt as economy changes.
“[The Treasury] can’t pay all wages forever. But a lot on furlough now likely to lose their job.”
The package will cost the Treasury an estimated £300 million a month for every million workers who take up the scheme – with Government contributions per worker capped at £697.92 per month.
By comparison, the furlough scheme has cost the Government £39.3 billion – about £6 billion a month.
Asked how the new package would be paid for, the Chancellor said there would be “difficult” decisions in the future.
He said decisions taken by previous chancellors – an apparent reference to the austerity measures since 2010 – had put the public finances in a position to allow him to act.
He said: “That’s what enabled me to react in this particular way, it reminds us of the importance of repairing public finances, having a strong economy, so that when problems like this come along you can throw a lot at them.
“But I will obviously have to make similar difficult decisions in the future as we get on a path back to sustainability, but right now the priority is supporting the economy, throwing everything we have got at protecting people’s jobs and that’s what I will continue to do.”
He went on to say detailed costings for the programme would not be published until “later in the autumn”.