Former BoE governor says extend furlough scheme indefinitely
Rishi Sunak should announce an indefinite extension of the coronavirus furlough scheme today with no changes to the level of pay, according to the former Bank of England (BoE) governor.
Lord Mervyn King, who was the BoE helmsman during the 2008 financial crisis, said today that the scheme should be in place until “the economy has recovered to a very large extent”.
King’s comments come as Sunak prepares to outline the Treasury’s plans this afternoon for the future of the job retention scheme, which is due to end next month.
The scheme sees the government pay 80 per cent of wages, up to £2,500 a month, to furloughed workers.
However, rumours have swirled in recent days that Sunak is set to cut the rate down to 60 per cent today.
So far, more than 6m people are being paid through the emergency package and it is costing an estimated £40bn for every three month it runs.
King told BBC Radio 4 this morning that Sunak should extend the scheme as it is indefinitely, while also allowing part-time workers to access it.
“The principle has to be that firms are supported for the lost revenues they are missing as a result of the economic shutdown,” he said.
“Keep it at 80 per cent, I don’t think it makes sense to regard this as the major cost of the Covid-19 crisis in economic terms.
“These payments under economic schemes are transferred from taxpayers in general to businesses, it will lead to an increase in national debt, we can finance that over a long period, particularly giving to the real level of long-term interest rates. The real cost of this shutdown is not measured on the impact of public finances, but by the lost incomes and output in the economy.”
The crossbench peer added that the scheme should be left in place until the British economy has fully recovered from the Covid-19 crisis.
“The criterion ought to be that the economy has recovered to a very large extent, back to the level of GDP we had when we entered the shutdown,” he said.
“The furlough scheme ought to be linked to the performance of the economy and not to a particular calendar timetable.”
A report out today from the left-leaning think tank The Resolution Foundation said the furlough scheme should be extended until September, with the pay rate remaining at 80 per cent.
The think tank argued it should be eased in step with the changing lockdown restrictions and that it should be altered on a sector-by-sector basis.